Income Tax

Deduction Under Section 80G – Complete Eligibility & Benefits

The Income Tax Act of 1961 allows certain deductions to taxpayers. These deductions are allowed to reduce the tax liabilities of taxpayers. The section 80G of this act addresses such deductions. In this article, we will discuss the deduction under section 80G that can be availed by the taxpayers.

The deduction is allowed from the total income of the assessee and tax is calculated on the net income after deduction. Let us understand both of the sections individually.

What Does Deduction under Section 80G Relate To?

Under Section 80G tax rebates are allowed to taxpayers for donations made to charitable organizations. The limit on the amount of deduction depends upon the organization to which donation is made.

This deduction is allowed to encourage donations on the part of taxpayers for the benefit and development of the society.

Benefits of Deduction Under Section 80G

The section 80G of Income Tax Act 1961 serves dual benefits for society. Primarily it reduces the tax liability of the taxpayers and provides them with a chance to invest that money in charitable and social development cases.

On the other hand, it acts as a pillar for activities carried out for social development. Donations from taxpayers create a large fund for social organisation.

Owing to such donation, these organisations can carry their work of social development.

What is the Applicable Limit of Deduction under Section 80G?

The limit of deduction allowed to taxpayers under this section is basically divided into 4 categories as under:

1. 100% deduction without any eligibility:

100% deduction is allowed against a donation made to specific government-specified charitable organizations. One can avail the whole amount as a rebate, which has been paid as a donation.

Some of the government specified charitable organizations are as under:

• CM’s Earthquake Relief Fund, Maharashtra
• National Children’s Fund
• National Illness Assistance Fund
• Swachh Bharat Kosh
• National Cultural Fund
• National Foundation for Communal Harmony
• Approved university or educational institution of National importance like IIT, NIT, etc.
• National Defense Fund formed by the central government

2. 100% deduction subject to eligible limit:

Donation made to the following organizations will qualify for 100% deduction subject to a specific limit:

• Any contribution, which is made by companies to Indian Olympics Association or to other notified organizations formed in India to develop the infrastructure for sports or for sponsoring sports in India.
• Any government approved authority/institution/association established to promote family planning.

3. 50% deduction without any eligible limit:

Donation made to the following organizations will qualify for a deduction of 50% of the total amount without any maximum limit:

• Rajiv Gandhi Foundation
• Jawaharlal Nehru Memorial Fund
• PM’s Drought Relief Fund
• Indira Gandhi Memorial Trust

4. 50% deduction subject to eligible limit:

Donation made to the following organizations will qualify for a 50% deduction subject to a maximum limit:

• Government/local authority established for charitable purpose except for family planning
• Any donation that is given for carrying out repairs and maintenance/renovation of notified mosques, temples, churches, gurudwara and so on.
• Any corporation established by the government for encouraging the minority community, which is referred to in Section 10(26BB) of the Income Tax Act.
• Establishment or authority formed in India to provide affordable housing or improvement of cities/villages.
• Donations which satisfy all the conditions mentioned in Section 80G(5) of the Income TaxAct.

How to Adjust Gross Total Income for Section 80G?

Following items should be deducted from total income to calculate Gross Total Income:

• Long term capital gains
• Short term capital gains under 115A or 115D
• Income earned under Section 115AB/C/D
• Deduction under section 80C to 80U (except 80G)

Which Assesses are Eligible to Avail this Deduction under Section 80G?

The following assesses are eligible to avail deduction under section 80G

• Individual
• Firms
• NGOs
• LLPs
• Partnerships
• Companies
• NRIs

However, in certain cases only companies are eligible.

Mode of Payment for Donations Under Section 80G

In order to avail deduction under section 80G, the donation has to be made in cash and not in kind. Donation in kind does not qualify for deductions.

Further, the mode of payment should be either through cheque, demand draft or cash. However, if cash is paid, then a maximum limit is imposed on the amount that can be paid through cash.

Conclusion

Every deduction under section 80G not only reduces the tax burden of taxpayers but also play a significant role in the development of society.

Such donation is helpful to achieve common goals of development of society and nation.

However, one should be very cautious at the time of filing for such deductions. Giving wrong information can attract a penalty for the taxpayer.

Suggested Reading:

• Steps for obtaining 80G Certificate