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Make donations, save income tax – Section 80G

Are you interested in philanthropic activities? Do you donate money to charities? If yes, you could be saving income tax. You could save tax even if you contribute money for public purposes. Read on.

Income tax act encourages many good causes – like buying a house, getting higher education, supporting a disabled dependent, etc.

Another good cause that it encourages is donation to charities or donations made for public good. This is covered under section 80G of the Income Tax (IT) Act.

Let’s find out the income tax benefits that you can get for such donations.

 

The benefit available

The amount you donate to these institutions or funds are deductible from your taxable income. The extent of deduction is either 50% or 100%, depending on the institution you donate to.

The deduction is available for donations made in cash or cheque only. Donations made in kind (like giving food, clothes, blankets, medicines, etc.) are not eligible for any deduction.

 

The importance of the receipt

On making the donation, the fund or institution would provide you a stamped receipt, and this is admissible as the proof of making a donation. The fund or institution’s eligibility under section 80G should be mentioned on the receipt.

The receipt should have the following information:

  • The name and address of the trust / institution
  • The name of the donor – that would be you!
  • The amount donated – this amount should be mentioned in words and figures, and both should match!
  • The registration number issued to the trust / institution by the income tax department under section 80G
  • The validity period of the registration – please ensure that the registration is valid on the date on which you make the donation

To be extra cautious, you can also ask for a photocopy of the 80G certificate issued to the trust / institution by the income tax department.

 

Limit for deductible donation

In case of certain funds or institutions, donations above 10% of your Adjusted Gross Total Income (GTI) are allowed for deduction only upto 10% of your adjusted GTI. Thus, even if you make a donation larger than 10% of your adjusted GTI, the donation eligible for deduction would be capped at 10% of your adjusted GTI. (Read on for an example)

Please note that this “10% of adjusted GTI” limit is applicable for the sum of all donations made by you, and not on each individual donation separately.

 

Calculation of Adjusted Gross Total Income

Adjusted Gross Total Income =
Gross Total Income
Less Long-term capital gains, if any, which have been included in the GTI
Less All deductions permissible under section 80C to 80U (except for deductions under section 80G)
Less Any income on which income tax is not payable (for example, agricultural income)
Less Certain incomes of NRIs (as per Section 115)

 

List of eligible funds and institutions (indicative only)

The deduction is not allowed for donations made to all charitable institutions – it is only admissible for certain approved or specified funds and institutions.

The entities allowed for sec 80G deduction are:

Particulars Amount of deduction allowed (as a % of the contribution) Whether restricted to 10% of Gross Total Income (GTI)
National Defense Fund 50 No
Jawaharlal Nehru Memorial Fund 50 No
Prime Minister’s Drought Relief Fund 50 No
Prime Minister’s National Relief Fund 100 No
Prime Minister’s Armenia Earthquake Relief Fund 100 No
Africa (Public Contributions-India) Fund 100 No
National Children’s Fund 100 No
Indira Gandhi Memorial Trust 50 No
Rajiv Gandhi Foundation 50 No
National Foundation for Communal Harmony 100 No
Approved university / educational institution 100 No
Maharashtra Chief Minister’s Earthquake Relief Fund 100 No
Zila Saksharta Samiti 100 No
National Blood Transfusion Council 100 No
Medical Relief Funds of a state government 100 No
Army Central Welfare Fund, Indian Naval Benefit Fund, Air Force Central Welfare Fund 100 No
Andhra Pradesh Chief Minister’s Cyclone Relied Fund 100 No
National Illness Assistance Fund 100 No
Chief Minister’s or Lt. Governor’s Relief Fund (Some conditions apply) 100 No
National Sports Fund 100 No
National Cultural Fund 100 No
Fund for Technology Development and Application set up by the Central Government 100 No
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities 100 No
Any other approved fund or institution 50 Yes
Donations to government / local authority for charitable purposes (excluding family planning) 50 Yes
Government / local authority / institution / association towards promoting family planning 100 Yes

Eligibility for donation

Any individual or Hindu Undivided Family (HUF) can claim this deduction under section 80G. Even non resident Indians (NRIs) can claim this benefit.

Example 1

Let’s say you have an income of Rs. 7 Lakhs in a year. You have fully utilized Section 80C benefits, and have invested Rs. 1 Lakh towards it.

You also make a donation of Rs. 1.5 Lakhs to a charitable institution having an 80G certificate from the income tax department.

Let’s see how much you can claim u/s 80G.

Since you have made the donation to a private trust, the allowable deduction is 50% of the amount donated, subject to an upper limit of 10% of the adjusted GTI.

Qualifying amount for 80G deduction is lower of donation amount (i) and 10% of adjusted GTI (ii)

(i) Donation amount: Rs. 1.5 Lakhs.

Gross Total Income (GTI) = Rs. 7,00,000

Adjusted GTI = Rs. 7,00,000 – Rs. 1,00,000 = Rs. 6,00,000

Therefore,

(ii) 10% of Adjusted GTI = Rs. 60,000

Thus, qualifying amount = Rs. 60,000.

Deduction available as per section 80G is 50%.

Thus, amount eligible to be claimed as deduction under section 80G is:

50% of qualifying amount = 50% of Rs. 60,000 = Rs. 30,000

Thus, in this case, you would be able to claim Rs. 30,000 as deduction under section 80G.

Example 2

Again, let’s say you have an income of Rs. 7 Lakhs in a year. You have fully utilized Section 80C benefits, and have invested Rs. 1 Lakh towards it.

You also make a donation of Rs. 75,000 to Prime Minister’s National Relief Fund.

Let’s see how much you can claim u/s 80G.

Since you have made the donation to the Prime Minister’s National Relief Fund, the allowable deduction is 100% of the amount donated, with no ceiling on the deduction.

Your Gross Total Income (GTI) = Rs. 7,00,000.

Adjusted GTI = Rs. 7,00,000 – Rs. 1,00,000 (claimed as deduction u/s 80C) = Rs. 6,00,000.

The deduction allowed u/s 80G would be:

100% of donation made = Rs. 75,000

Please note that in this case, you would be able to claim the full contribution of Rs. 75,000 as deduction under section 80G even when the 10% of adjusted GTI is Rs. 60,000 – because for claiming deduction for donations made to the Prime Minister’s National Relief Fund, there is no cap on the amount of deduction!

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