Tax Deduction under Section 80G for Donations towards Social Causes
Have you donated money for charity, social or philanthropic purposes, or, have made contributions towards a National Relief Fund? If yes, then you could use these donations to reduce your tax outgo. The Income Tax Act encourages charitable deeds towards the poor and needy, and offers donors tax benefits under Section 80G. Read on to find out more about this section.
Understanding Section 80G
Section 80G offers a tax deduction for donations to certain prescribed funds and charitable institutions. Here are the details of the section.
Eligible Assesses
This section is applicable to all assessees, who make an eligible donation, whether an individual, HUF, NRI or a company.
Deduction Limit
The extent of deduction is either 50% or 100% of the contribution, depending on the charitable institution donated to.
For certain funds, the aggregate deduction is limited to 10% of the “Adjusted Gross Total Income”. So, in such cases, even if you do make a donation larger than 10% of your Adjusted Gross Total Income, the donation amount eligible for claiming a deduction would be capped at 10% of the Adjusted Gross Total Income.
The Adjusted Gross Total in this case, is the gross total income minus long-term capital gain, short term capital gain and all deductions u/s 80CCC to 80U except any deduction under this section.
Scope of Deduction
The donation may be paid either out of taxable or exempted income.
Only donations made in cash or cheque are eligible for deductions. Donations made in kind, in the form of food, clothing, medicines etc are not eligible.
Donations to foreign charitable trusts are not eligible for any deduction.
Political parties (BJP,CPI,Congress,CPM,BSP,SP) are eligible for 100% deduction.
For donations made to Indian Olympic Association, any association notified u/s 10(23) for development of infrastructure for sports or games, or for sponsorship of sports or games, only a company is eligible for deduction.
Donations made to not all charitable institutions qualify for a deduction. Here is a list of approved charitable institutions and funds that qualify for a deduction.
Donations with 100% deduction without any qualifying limit:
Prime Minister’s National Relief Fund
National Defence Fund
Prime Minister’s Armenia Earthquake Relief Fund
The Africa (Public Contribution - India) Fund
The National Foundation for Communal Harmony
Approved university or educational institution of national eminence
The Chief Minister’s Earthquake Relief Fund, Maharashtra
Donations made to Zila Saksharta Samitis.
The National Blood Transfusion Council or a State Blood Transfusion Council.
The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
Army Central Welfare Fund, Indian Naval Ben. Fund, Air Force Central Welfare Fund.
National Illness Assistance Fund
Chief Minister's or Lt. Governor's Relief Fund
National Sports Fund
National Cultural Fund
Govt./ local authority/ institution/ association towards promoting family planning
Central Govt.'s Fund for Technology Development & Application
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
Indian Olympic Association/ other such notified association
Andhra Pradesh Chief Minister's Cyclone Relied Fund
Donations with 50% deduction without any qualifying limit.
Jawaharlal Nehru Memorial Fund
Prime Minister’s Drought Relief Fund
National Children’s Fund
Indira Gandhi Memorial Trust
The Rajiv Gandhi Foundation
Donations to govt./ local authority for charitable purposes (excluding family planning)
Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB)
Donations for repair/ renovation of notified places of worship
World Vision India
Udavum Karangal
Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
Donations to the Government or a local authority for the purpose of promoting family planning.
Sums paid by a company to Indian Olympic Association
Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.
The Donation Receipt
In order to claim deduction, it is mandatory for the donor to furnish a proof of payment towards the eligible fund or institution. A stamped receipt is issued by the recipient trust in this regard, which must be attached by the assessee along with the income tax returns.
The receipt must include the following details.
Name and address of the trust
The name of the donor
The amount donated, mentioned in words and figures
The registration number of the trust, as given by the income tax department under section 80G, along with its validity period.
Tax benefits cannot be claimed without the above mentioned details and document.
Donations deducted from Salary
Where employees have contributed towards eligible charitable causes from their salaries and the donation receipt is on the employer’s name, a deduction under section 80G could still be claimed. In such cases, the employer would need to issue a certificate mentioning that the contribution was made from the employee’s salary account.
There are many trusts in India engaged in charitable activities. In order to ensure that only contributions to genuine trusts entail a tax benefit, the government has brought in registration of trusts. Thus, before you donate, check to see, if the trust you are donating to is registered and has the tax exemption certificate, which is popularly known as the 80G certificate.
Note: Donation in cash is acceptable only up to Rs. 10,000 for being eligible for deduction under section 80G.