Section 80G: Income Tax Deductions for Donations
If there is one section under the Income Tax Act, 1961 that anyone can use, it is section 80G, helps you claim deductions on donations.
Irrespective of whether you are an individual, company, or a partnership firm, you can claim tax exemptions under this section. Even if you are a Non-Resident India (NRI), you are eligible to claim benefits under this section.80G has nothing to do with mutual funds, insurance or home loan. So, what’s the section all about?
Section 80G allows you to claim tax deductions from your total taxable income if you have made donations or charity contributions. The deductions under Section 80G have nothing to do with deductions available under Section 80C. However, the maximum limit for 80G is 10% of your total income for most donations.
Note that the donations will be eligible for tax deduction only if it is made using cheque, demand draft or cash. What does this mean? This means that donations in the form12 of food, clothes or any other items will not be eligible for tax deductions under Section 80G. From 2017-18, donations made in cash that are more than Rs. 2,000 cannot be claimed as a tax deduction. Earlier, this limit was Rs. 10,000.Learn how to mange your money & create wealth, Download your FREE eBook now
The tax deduction limits
The first point you need to note is that tax deductions can be claimed only for contributions that you make to an Indian trust or organization. Even if you make these contributions, not all donations will be eligible for a tax deduction. Specific donations made to notified funds and institutions can be claimed as tax deduction under this section. There are also limits to the amount of deduction that you can claim.
The Income Tax Act has given all the rules regarding which donations qualify for 100% tax deductions and which ones qualify for only a 50% tax deduction. For instance, donations given to organizations or trusts such as the National Defence Fund and Primer Minster’s National Relief Fund will be eligible for 100% tax deductions. This means that you can claim the whole amount that you contributed to these funds as a tax deduction.
There are many organizations/schemes/trusts to which you can contribute and claim a 100% tax deduction without any qualifying limit. Here are the funds to which you can contribute to claim a full tax deduction without any limits.
- Central Government’s National Defence Fund
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- National Illness Assistance Fund
- National Blood Transfusion Council / State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- Fund for Technology Development and Application
- National Children’s Fund
- National Sports Fund
- A national-level approved university/educational institution
- Zila Saksharta Samiti in any district under the chairmanship of the Collector of that district
- State Government fund for medical relief to the poor
- National Cultural Fund
- Chief Minister’s Relief Fund / Lieutenant Governor’s Relief Fund
- The Army Central Welfare Fund / Indian Naval Benevolent Fund / Air Force Central Welfare Fund
- Andhra Pradesh Chief Minister’s Cyclone Relief Fund
- The Maharashtra Chief Minister’s Relief Fund
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Any fund set up by the Gujarat State Government exclusively for providing relief to the victims of the earthquake
- Swachh Bharat Kosh
- Clean Ganga Fund
- National Fund for Control of Drug Abuse
- Africa (Public Contributions – India) Fund
- Prime Minister’s Armenia Earthquake Relief Fund
There are charitable institutions to which you can donate and claim a 50% tax deduction. This means that you can claim only half of what you contributed as a tax deduction. For instance, you can use only use the Rs. 40,000 as the tax deduction amount if you contribute Rs. 80,000. The notified schemes for which you can claim 50% tax deduction without any maximum limit are:
- Prime Minister’s Drought Relief Fund
- Jawaharlal Nehru Memorial Fund
- Rajiv Gandhi Foundation
- Indira Gandhi Memorial Trust
Then, there are limits to the contributions made to certain organizations. If you donate to these charitable institutions, the tax deductions that you claim cannot exceed 10% of your gross total income. So, this is the maximum limit for donations to these schemes. For instance, donations made to promote family planning will be eligible for a 100% deduction. However, the tax deduction will be limited to 10% of your adjusted gross total income. Here are the schemes that fall under this category:
- Donation by a company to the Indian Olympic Association or any other association or institution notified for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India (individual taxpayers cannot claim this deduction)
- Donations to the government or any approved local authority, institution or association to be utilized to promote family planning
There is another category where donations to certain schemes will qualify for 50% tax deduction and the maximum limit will be 10% of your gross total income. Here are the funds to which you can contribute and get a 50% tax deduction with a limit being 10% of your total income:
- For repairs or renovation of any notified temple, mosque, gurudwara, church or other places.
- Government or any local authority, to be utilized for any charitable purpose other than the purpose of promoting family planning
- Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both
- Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community
- Any other fund or any institution which satisfies the conditions mentioned in Section 80G(5)
For donations that have a maximum limit, you need to calculate the amount of adjusted gross total income. This will be your total income from various categories minus exempt income, long-term capital gains and other deductions under Section 80C to 80U (except Section 80G). As mentioned earlier, you can claim either 100% or 50% of the donation amount based on the rules under Section 80G. Here are some examples.
Let’s say you contributed Rs. 1.2 lakh to the Indian Olympic Association. This qualifies for a 100% deduction. However, if your adjusted gross total income comes to Rs. 9 lakhs, you can claim only Rs. 90,000 as a tax deduction.
You can claim tax deductions under Section 80G through your employer only for donations where there is no maximum limit. If you make donations to funds within the 10% total income limit, you will have to claim the deduction at the time of filing income tax returns.
Deductions under Section 80GGA
Section 80GGA is for donations made towards scientific research or rural development. All taxpayers can claim tax deduction under Section 80GGA except those who have an income/loss from a business and/or profession. 100% of the amount donated is considered eligible for tax deductions. Eligible funds include:
- Sum paid to a research association which undertakes research in social science or statistical research, or sum paid to a college, university or any other institution to be used for the same purpose, and these must all be approved by the prescribed authority under section 35(1)(iii)
- Any sum paid to a research association which undertakes scientific research, or a sum paid to a college, university or any other institution to be used for scientific research that is all approved by the prescribed authority under section 35(1)(ii)
- Sum paid to an approved association or institution which undertakes any program of rural development and is approved under section 35CCA
- A sum paid to notified Rural Development Fund, Fund for Afforestation and National Poverty Eradication Fund
Expenses claimed under Section 80GGA shall not be deductible under any other provision of the Income Tax Act.
How to claim a tax deduction
To claim deductions for your donations, you need to submit the following details in your Income Tax Return (ITR).
- Name of the trust/scheme/fund
- PAN of the trust/scheme/fund
- Address of the trust/scheme/fund
- Amount of Contribution
If you need help with tax planning, get in touch with Mymoneysage and they can help reduce your tax burden.