Save tax on Donations under Section 80G Deductions

Deduction under Section 80G of the Income Tax Act

In move to encourage donation from individuals and corporates, the government has exempted donation amounts, that can be deducted from income, given to select charitable organisations and government specified schemes/institutions.

Section 80G of income tax law provides tax benefits on amount donated to NGO’s.

Eligibility:

Any person or ‘assessee’ or HUF who makes an eligible donation is entitled to get tax deductions subject to conditions.

If the aggregate of the sum exceeds ten per cent of the gross total income then the amount in excess of ten per cent of the gross total income shall be ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed.

Only registered institutions are eligible

Yes, not all charity and institutions qualify for deductions. Only, which are registered under section 80G of Income Tax Act qualify.

If you are yet to make donation than you should consider these points while availing receipt.

The donation receipt should have the following information:

  • The name and address of the trust / institution
  • The name of the donor
  • The amount donated
  • The registration number issued to the trust / institution by the income tax department under section 80G

*Check the validity period of the 80G certificate. Always insist on a photocopy of the 80G certificate in addition to the receipt.

Other conditions:

  • Donation made in cash or cheque are qualified for the deduction anything in kind( food, medicine etc.) are not eligible.
  • Donations made to foreign charitable trusts or to political parties are not eligible for any deduction.
  • 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 by NRI are also eligible only on eligible institutions and funds.

Donations with 100% deduction without any qualifying limit:

1. Prime Minister’s National Relief Fund
2. National Defence Fund
3. Prime Minister’s Armenia Earthquake Relief Fund
4. The Africa (Public Contribution – India) Fund
5. The National Foundation for Communal Harmony
6. Approved university or educational institution of national eminence
7. The Chief Minister’s Earthquake Relief Fund, Maharashtra
8. Donations made to Zila Saksharta Samitis.
9. The National Blood Transfusion Council or a State Blood Transfusion Council.
10. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.

Donations with 50% deduction without any qualifying limit:

1. Jawaharlal Nehru Memorial Fund
2. Prime Minister’s Drought Relief Fund
3. National Children’s Fund
4. Indira Gandhi Memorial Trust
5. The Rajiv Gandhi Foundation.

Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income

1.Donations to the Government or a local authority for the purpose of promoting family planning.
2.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

1.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.

Limit of Deduction under section 80G

There is no limit on the total deduction that can be claimed under Section 80G. For example, employees can claim deduction under Section 80G to the extent of even their total income (leading to zero taxable income).

Donations deducted from Salary

Income Tax Department has specified that an employer can accept information on only certain donations (such as those to The Prime Minister’s Drought Relief Fund) for the sake of calculating deduction on salary. For other donations, employees should seek tax relief in their tax return filed with the Income Tax Department and cannot route the same through the employer.

Example

If Sanyam is a salaried person and his income is Rs 5,00,000/-. Now he donates Rs 50000/- to one of the approved institutions/NGOs.

Save tax on donations through 80G deductions

Particulars Amount
Total Income for the year 2012-13 Rs. 5,00,000.00/-
Tax payable before Donation Rs. 30,000.00/-
Qualifying amount for deduction (50% of donation made) Rs. 25,000.00/-
Amount of deduction u/s 80G ( Qualifying Amount subject to a maximum limit 10% of the Gross Total Income) Rs. 25,000.00/-
Taxable Income after deduction Rs. 4,75,000.00/-
Tax payable after Donation Rs. 27,500.00/-
Tax Benefit U/S 80G (ii)-(v) Rs. 2,500.00/-

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