A Detailed Summary of Income Tax Deduction on Donation

Introduction

Plenty of us have considered donating to charity and helping the community at a certain stage in life. It is admirable to contribute to a cause that sincerely believes in and create change. Given the noble nature of this act of kindness, the government fully supports charitable services. Donations to charitable organisations are tax-deductible under Section 80G of the Indian Income Tax Act.

Section 80G

Donations to certain relief funds and nonprofit foundations are deductible under Section 80G of the Income Tax Act. However, all donations are ineligible for Section 80G deductions.

Qualifications under Section 80G

Only those taxpayers (individuals/companies/Hindu Undivided Families) are capable to avail charitable contributions and claim a deduction under Section 80G, subject to government limits. NRIs are also qualified for Section 80G benefits if their donations are made to eligible trusts or institutions.

Donations Authorized Under Section 80G

People who wish to claim deductions under Section 80G must guarantee that the organisation to which they are donating is covered by this Act. Money donated to enrolled and legitimate funds or charitable trusts are the only ones that qualify for appropriate deductions. Trusts and charities must be registered under Section 12A in order to be eligible for the 80G certificate. People are recommended to consult an organization’s credentials before committing to it.

Deduction Claim

To claim this deduction, you must include the following information in your income tax return:

• The donee’s name
• The donee’s PAN
• The donee’s address
• Contribution amount – the breakdown of cash and other modes of contribution
• The amount that could be deducted

Section 80G Exemptions

Individual donations do not always qualify for Section 80G deductions. Donations to foreign trusts and political parties are not covered by this section, and individuals cannot claim tax deductions for them.

Deduction pursuant to Section 80G

Certain conditions apply to donations made to eligible trusts/charities that qualify for tax deductions. Section 80G donations could be widely grouped into four types, as listed below.

Donations eligible for 100% deduction

Certain donations are eligible for a full tax deduction with no qualifying limit. These include-

• The Central Government Prime Minister’s National Relief Fund established the National Defence Fund.
• The National Foundation for Community Harmony is a non-profit organisation dedicated to promoting community harmony throughout the United States.
• A university/educational institution of national renown that has been approved.
• Zila Saksharta Samiti 
• The National Illness Assistance Fund
• National Blood Transfusion Council, as well as any State Blood Transfusion Council
• The National Trust for the Welfare of People with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities 
• National Sports Foundation
• Fund for Technology Development and Application of the National Cultural Fund
• Children’s National Fund

and others. 

Donations with a 50% tax deduction (no qualifying limit)

Donations to trusts such as the Prime Minister’s Drought Relief Fund, the National Children’s Fund, the Indira Gandhi Memorial Fund, and others qualify for a 50% tax deduction on the amount donated.

Donations with a full tax deduction (limited to 10% of adjusted gross total income)

Donations to local authorities or the government to encourage family planning, as well as donations to the Indian Olympic Association, are eligible for tax deductions under this category. In such cases, deductions are limited to 10% of the donor’s Adjusted Gross Total Income. Donations in excess of this amount are rounded up to the nearest ten per cent.

Donations with a 50% deduction (limited to 10% of adjusted gross total income)

Donations made to any local authority or the government that will be used for any charitable purpose are eligible for deductions under this category. In such cases, deductions are limited to 10% of the donor’s Adjusted Gross Total Income. Donations in excess of this amount are subject to a 10% tax.

Deduction’s Scope

For a donation to be valid under Section 80G, certain basic criteria must be met. Some of the key points are listed below-

• Donations should only be made with taxable or exempted income. Donations made with non-taxable income do not qualify for a tax deduction.
• Only cash or check donations are eligible, with donations in the form of clothes, food, medicines, and so on being ineligible under Section 80G.
• When it comes to donations to the Indian Olympic Association, only corporations are eligible for tax breaks.
• Donations made to valid and registered trusts are the only ones that qualify for tax breaks.
• Donations to foreign institutions and political parties are not deductible.

Payment Method for Donations Under Section 80G

Donations made under Section 80G may be deducted by an individual. Donations can be paid for in cash, by check, or by draught. However, there are a few things to keep in mind in this regard:

• Beginning in fiscal year 2017-18, cash donations in excess of Rs.2,000 will no longer be eligible for the deduction.
• Donations in kind (food, medicine, clothing, etc.) are not eligible for the deduction.
• To be eligible for Section 80G deductions, donations of more than Rs.2,000 must be made in any mode other than cash.
• The donations would be permissible for a tax rebate of 50% or 100% (with or without restrictions), depending on the rules outlined in Section 80G.

Conclusion

Section 80G of the Income Tax Act of 1961 allows an assessee to deduct donations made to certain organisations. Certain conditions apply to this deduction. The Government of India’s motivation for instituting the 80G tax reduction is to motivate charitable contributions. The sum offered to donate to notified funds or institutions can be claimed as a deduction under 80G when filing an income tax return. Only donations made to institutions registered under section 80G or to the funds specified in that section are eligible for a tax deduction.