Understanding Section 80G: A Guide to Income Tax Savings

Section 80G of the Income Tax Act, 1961, provides an avenue for taxpayers to reduce their tax liability through charitable donations. Donating to eligible charitable institutions allows taxpayers to claim deductions, ranging from 50% to 100% of the donated amount. However, specific limits and conditions must be met to avail of these deductions. Let's delve into the details of how Section 80G facilitates tax savings and explore its various aspects.

What is section 80G of income tax act?

Section 80G of the Income Tax Act, 1961, allows individual taxpayers under the old tax regime to claim deductions on their taxable income for donations made to certain charitable institutions and funds. In simpler terms, it encourages charitable giving by offering tax benefits to those who donate.

Who can claim a deduction under Section 80G?

All taxpayers, whether resident or non-resident, who have donated money to prescribed funds, institutions, or associations are eligible to claim a deduction from gross total income before the levy of tax, under Section 80G. However, it's important to note that this deduction can only be claimed by taxpayers who have opted for the old tax regime. Taxpayers under the new tax regime cannot avail of this deduction benefit.

How much deduction can you claim under Section 80G? 

The deduction under this provision is categorized as follows: (a) 100% deduction without any maximum limit (b) 50% deduction without any maximum limit (c) 100% deduction subject to a maximum limit (d) 50% deduction subject to a maximum limit. When claiming the deduction, the initial step involves checking the category to which the fund/charitable institution belongs. This determines the deduction percentage (100% or 50%) and whether there is a maximum or qualifying limit.

Payments to certain institutions are eligible for 100% or 50% without any qualifying limit. However, in some cases, you must ascertain the maximum qualifying limit eligible for deduction. If the total amount donated to those specified funds or institutes exceeds 10% of your adjusted gross total income (GTI), any excess amount beyond the 10% limit will not be eligible for deduction.

The adjusted gross total income is calculated after subtracting amounts under Section 80C to 80U (except Section 80G), share of profit in Association of Persons (AOP) eligible for rebate under Section 86, long-term capital gains, short-term capital gain from specified securities, and income referred to in various sections.

What is the Eligibility to Claim Deduction u/s 80G?

Both individuals and entities, whether companies or non-companies are eligible to claim deductions under Section 80G of the Income Tax Act for donations made to approved charitable institutions or funds.

The deduction under Section 80G applies to: Individuals, Companies, Firms, Hindu Undivided Firms (HUF), Non-Resident Indians (NRI), Any other legal entity or person

It's essential to emphasize that only donations made to specified funds are eligible for this deduction. Additionally, individuals who choose the new tax regime are not eligible for this deduction.

Documents Needed For Section 80G Tax Deduction:

1. Donation Receipt: Must include Name, Address, PAN, trust registration number, donor's details, donation amount, and payment mode.

2. Trust Registration Number: Unique to each trust, this number should be on the receipt, valid for a specific period.

3. 80G Certificate Copy: Request a photocopy of the trust's 80G registration certificate when obtaining the receipt.

How to Make Deductible Donations?

1. Acceptable Modes: Deductions are allowed for cash, cheque, or electronic donations. Note that cash donations above Rs. 2,000 are not eligible.

2. Non-Deductible Forms: Donations in kind are not eligible for deduction under Section 80G.

3. Proof of Donation: To claim the deduction, donate to a qualifying fund or institution. Ensure the recipient files a donation statement with the Income-tax Department and provides the donor with Form 10BE certifying the donated amount for the year.

Funds Qualifying for 100% Deduction:

1. National Defence Fund

2. PM National Relief Fund

3. PM CARES FUND (PM Citizen Assistance and Relief in Emergency Situations Fund)

4. National Children's Fund

5. CM Relief Fund or the Lieutenant Governor's Relief Fund

6. Zila Saksharta Samiti

7. Army Central Welfare Fund

8. Indian Naval Benevolent Fund

9. Air Force Central Welfare Fund

10. Andhra Pradesh CM Cyclone Relief Fund

11. National Sports Fund

12. National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities

13. Swachh Bharat Kosh (not in pursuance of CSR)

14. Clean Ganga Fund (not in pursuance of CSR) - Only for resident assesses

15. National Illness Assistance Fund

16. National Blood Transfusion Council or State Blood Transfusion Council

17. Fund set up by a State Government for medical relief to the poor

18. National Cultural Fund

19. Fund for Technology Development and Application

20. National Foundation for Communal Harmony

21. PM Armenia Earthquake Relief Fund

22. Africa (Public Contributions - India) Fund

23. CM Earthquake Relief Fund, Maharashtra

24. A university or educational institution of National eminence approved by tax authorities

25. Fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat.

Funds Qualifying for 50% Deduction without Maximum Limit:

1. Jawaharlal Nehru Memorial Fund

2. PM Drought Relief Fund

3. Indira Gandhi Memorial Trust

4. Rajiv Gandhi Foundation

The Finance Act of 2023 has amended Section 80G, specifying that donations to the name-based funds—Jawaharlal Nehru Memorial Fund, Indira Gandhi Memorial Trust, and Rajiv Gandhi Foundation—no longer qualify for deduction under Section 80G. Donations to these three funds made on or after 01-04-2023 will not be eligible for deduction under this provision.

Funds Qualifying for 100% Deduction Subject to Maximum Limit:

1. Family Planning Association of India/Red Cross Society of India

2. Government or any approved local authority, institution, or association for promoting family planning

3. Indian Olympic Association or any other notified association or institution in India for sports development or sponsorship (Note: Deduction for these institutions is allowed only to companies, not individuals)

Funds Qualifying for 50% Deduction Subject to Maximum Limit:

1. Notified temple, mosque, gurudwara, church, or other places (for repairs or renovation)

2. Government or any local authority for charitable purposes excluding family planning

3. Any corporation specified in Section 10(26BB) for promoting the interests of the minority community

4. Any authority constituted in India for housing accommodation, planning, development, or improvement of cities, towns, and villages

5. Any other fund or institution meeting the conditions specified in Section 80G(5)

Note: The list of institutions approved by the Principal Commissioner or Commissioner of Income Tax, eligible to receive donations under Section 80G, is periodically updated by the income tax department. Confirm the institution's status on the approved list before making a donation.

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