Income Tax

Section 80G – Donations Eligible Under Section 80G and 80GGA – 80G Exemption List

Monetary donations for social welfare purposes are a noble act. Everybody should consider contributing a certain amount to social causes to fulfil our social responsibility. The government also extends support for making such contributions, such as tax relief in the form of tax deductions. All such tax deductions are administered under Section 80G.

About Section 80G

Section 80G is the contribution made to the relief funds and humanitarian organizations. Such donations are available for deduction under section 80G of the Internal Revenue Code. Deduction under section 80G can be claimed by any taxpayer irrespective of the fact that it is a person, a corporation, a partnership or another entity. However, Section 80G does not apply to all donations. It is limited to contributions made to specified trusts.

Eligibility to Claim Deduction under Section 80G

The following taxpayers are eligible to claim a deduction under this section:-

1. Individuals
2. Firms
3. Hindu Undivided Family (HUF)
4. Companies
5. Non-resident Indians (NRIs)
6. Any other person

Note: This deduction is unavailable to those who have opted for the new tax regime.

Update on the Section 80G

The Budget 2023 has provided that any donations made to the following funds shall not be eligible for any deduction under Section 80G:

• National Defense Fund
• Prime Minister’s National Relief Fund
• The National Foundation for Communal Harmony
• National/State Blood Transfusion Council

A 50% deduction is available for the following donations without any qualifying limit:-

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

How to Claim the 80G Deduction

In order to claim this deduction, the following information must be provided on your Income Tax Return:-

1. Name
2. PAN Card
3. Address
4. Contribution Amount
5. The amount eligible for deduction

What is the mode of payment under Section 80G?

Taxpayers can claim deductions under Section 80G by making donations through the following modes:-

• Cheque
• Demand Draft
• Cash (for donations less than INR 2,000)

Note: Contributions in kind such as food, clothes, material, medicines, etc. and donations of more than INR 2,000 if they do not qualify for deduction under Section 80G. Donations of more than INR 2,000 made in any mode other than cash to qualify under Section 80G.

Tax Exemption under Section 80G

Any contribution to a rescue fund or charity organization is available for deduction. This reduction can be used by calculating net taxable revenue. Deductions for donations are subject to the following conditions:-

1. Every contribution is not eligible for a full tax deduction. The assessee should adhere to the organization’s eligibility for seeking a deduction.
2. The deduction can be demanded by specific taxpayers, Indian corporations, alliance firms, and other assesses.
3. The deduction is available for any cash contribution exceeding INR 2000.
4. No deduction is available for any contribution made in kind, such as clothing, food, or drugs.

The amount of contribution depends on the eligibility requirements. Section 80G permits a deduction of either 100% or 50%, with or without limitations.

Donation Limit under Section 80G

Under Section 80G, not every donation accounts for a 100% deduction. The tax benefit is based on the organization’s eligibility. The available limit of deduction may be 100% or 50%, with or without limitations. The amount deducted from a contribution is termed the qualifying amount. The qualifying amount must be carefully measured to prevent misrepresentation of income tax returns.

Donations available for a 100% deduction under Section 80G without any qualifying limit are as follows:-

1. National Defence Fund by the Central Government
2. National Foundation for Communal Harmony
3. Prime Minister National Relief Fund
4. Zila Saksharta Samiti in districts under the chairmanship of the collector of that district
5. National Illness Assistance Fund
6. A University/educational institution of National eminence
7. Fund for medical relief to the poor raised by the State government
8. Chief Minister’s Earthquake Relief Fund
9. National Sports Fund
10. National Blood Transfusion Council
11. National Cultural Fund
12. National Children’s Fund
13. Clean Ganga Fund (applicable from FY 2014-15)
14. Swacch Bharat Kosh (applicable from 2014-15)
15. Africa (Public Contributions-India) Fund
16. National Fund for Control of Drug Abuse (applicable from FY 2015-16)

Documents required to claim a tax deduction on donations

Taxpayers willing to claim deduction under Section 80G must provide the following documents to support their claim:-

• Duly stamped receipt:- It is mandatory to submit the receipt issued by a charity or trust. The receipt must include the details like name, address, PAN number of the trust, amount donated, etc.

• Form 58:- Form 58 is mandatorily required if a donor intends to claim a 100% deduction.

• Registration number of the trust:- The Income Tax Department provides a registration number to all eligible trusts under this section. Donors must ensure that the receipt contains the registration number of the trust.

Calculation of Deduction under Section 80G

The following are the steps to calculate the amount of deduction under section 80G:

Step 1: You have to examine the category in which the fund/charitable institution falls to know whether a 100% or 50% deduction, with or without a maximum/qualifying limit, is available.

Step 2: There is no need for additional calculation if the payment is made to the first category. Simply 100% or 50% of the contribution amount as taxable income can be claimed.

Step 3: When a contribution is made to the second category. First, the maximum or the qualifying deduction limit under section 80G has to be determined. The maximum of the qualifying level is 10% of the adjusted gross total income.

Step 4: Apply the following method to obtain the amount of deduction

1. Gross Qualifying Limit = Total Donations to Category 2
2. Net Qualifying Limit = 10% of the adjusted gross total income
3. Amount deductible = 100% or 50% of the donation amount subject to the qualifying amount.

About Section 80GGA

Under Section 80GGA, donations made to scientific studies or agricultural development are deducted. Other than those with income from a company or occupation, all assessments are eligible for deduction. Donations can be made via cheque, draft or currency; however, cash donations above INR 10,000 are ineligible for tax deductions. Tax refunds are available for 100% of the money donated or contributed.

Eligible Deductions under Section 80GGA

Following are some of the donations available for deduction under section 80GGA:-

• Amount paid to research organizations conducting scientific research or any amount paid to colleges, universities or other institutions for scientific research as long as the specified authority authorizes the amount under section 35(1)(ii).
• Amount paid to research organizations conducting social science or statistical research, including the amount paid to a college, university or other institution for the same reason subject to both being authorized by the specified authority under section 35(1)(iii).
• The amount charged to an accredited agency or organization to educate people to take up rural development programs.
• The amount charged to a public sector corporation, an authorized agency or organization or a local government for implementing projects or schemes authorized under section 35AC.

Any charges deducted under section 80GGA are not deductible under any other provision of the Income Tax Act¹.

How to calculate 80GG?

Deduction under Section 80GG is allowed as the lowest of below mentioned:-

• INR 5,000 per month
• 25% of the adjusted total income
• Actual rent deducted from 10% of adjusted total income

What is adjusted total income?

Adjusted gross total income is the gross total income, i.e., the sum of income under all heads) reduced by the aggregate of the following:-

• Amount deductible under sections 80C to 80U except Section 80G
• Income is referred to in Sections 115A, 115AB, 115AC, 115AD and 115D.
• Exempt Income
• Short-term capital gains u/s 111A
• Long-term capital gains

Conclusion

Social welfare is a noble act. Every person making a monetary contribution is granted certain from the government of India regarding tax deductions. Under Section 80G, contributions to relief funds and humanitarian organizations can be deducted, and under Section 80GGA, donations are made to scientific studies or agricultural or rural development.

FAQs

1. https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx