Income Tax

Section 80G of the Income Tax Act 1961: An Overview

It is a notion that donating to charity is doing our bit for society. Considering the nobility of this gesture, the government provides its full support towards charitable services along with providing tax deductions on the donated amount. Section 80G of the Income Tax Act 1961  (ITA 1961)  provides a tax deduction for contributions to some relief funds and charitable institutions. Thus, the assessee can claim tax deductions under this section apart from Section 80C for saving maximum taxes. The present article shall discuss Section 80G of the Income Tax Act and its related aspects to provide clarity on this subject.

Section 80G of the Income Tax Act: Meaning

Section 80G of the ITA provides for a deduction for donations made to certain charitable institutions or funds. The deduction is available to individuals and companies as well.

 Deduction under this section can be claimed on the amount donated to eligible institutions or funds up to a maximum of 50% or 100% of the donated amount, depending on the institution or fund to which the donation has been made.

However, it must be noted that not all donations are eligible for deduction under this section. Only donations made to certain specified funds or institutions are eligible for deduction. Therefore it is important for the assessee to check the eligibility of deduction under Section 80G with regard to the institution or fund to which the donation has been made. In order to claim the deduction under section 80G, the assessee must obtain a receipt or 80G certificate from the institution or fund to which the donation has been made.

The receipt must contain the name and address and PAN no.of the institution or fund, the amount donated, and the registration number of the institution or fund under this section

Donations Ineligible under Section 80G

The Union Budget 2023 provided that donations made to the following funds would be ineligible for any deductions under 80G:

• National Defense Fund
• Prime Minister’s National Relief Fund
• The National Foundation for Communal Harmony
• National/State Blood Transfusion Council
• Donations which are eligible for a 50% deduction  and don’t have any qualifying limit:
• Jawaharlal Nehru Memorial Fund
• Rajiv Gandhi Foundation
• Indira Gandhi Memorial Trust
• Prime Minister’s Drought Relief Fund

Eligibility for claiming deduction under Section 80G

The below-mentioned can claim a deduction under this section:

• Individuals 
• Companies 
• Firms 
• Hindu Undivided Firm (HUF)
• Non-Resident Indian (NRI)
• Any other person

However, all donations aren’t eligible for deductions under Section 80G. Only donations made to prescribed funds qualify as a deduction. It must be noted that deductions won’t be available if the assessee opts for the new tax regime. 

Mode of payment

Section 80G deductions can be claimed by the assessee upon making the donations through the following modes: 

• Cheque 
• Demand draft 
• Cash (for donations below Rs 2,000)

In-kind contributions such as food, clothes, material, medicines etc., and donations of above Rs 2,000 in case they aren’t qualifying for deduction under this section Donations above Rs 2,000 should be made in any mode other than cash for qualifying as per this provision.  There are various donations prescribed in Section 80G which are eligible for a deduction of up to 100% or 50% with or without restriction  

Manner for claiming deduction

In order to claim this deduction, the assessee must submit the following details along with the income tax return:

• Name of the donee
• PAN of the donee
• Address of the donee
• Amount of contribution – the breakup of contribution in cash and another mode
• The amount eligible for deduction

Essential Details for Claiming Section 80G

The above-mentioned details need to be mentioned in the respective tables given in the ITR.

Table A: Regarding donations entitled to 100% deduction without qualifying limit

Table B: For donations entitled to 50% deduction without qualifying limit

Table C: For donations entitled to 100% deduction subject to qualifying limit

Table D: For donations entitled to a 50% deduction subject to the qualifying limit

List of donations  which are eligible for 100% deduction without qualifying limit

• National Defence Fund established  by the Central Govt¹
• Prime Minister’s National Relief Fund, i.e. PMNRF
• National Foundation for Communal Harmony, i.e. NFCH
• An approved educational institution  or university of National eminence
• Zila Saksharta Samiti  established  in any district under the chairmanship of that  district Collector
• Fund established  by a state govt for providing medical relief to the poor people
• National Illness Assistance Fund (NIAF)
• National or State Blood Transfusion Council
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
• National Sports Development  Fund (NSDF )
• National Cultural Fund (NCF)
• Fund for Technology Development and Application
• National Children’s Fund (NCF)
• Chief Minister’s Relief Fund (CMRF)  or Lieutenant Governor’s Relief Fund (LGRF)  regarding  any State or Union Territory
• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
• The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• Any fund  created by the State Govt  of Gujarat for exclusively  providing relief to the victims of the earthquake in  the State of Gujarat
• Any trust,  fund or institution  to which Section 80G(5C)  is applicable for providing relief to the victims of the earthquake in the state of Gujarat (contribution made between 26.01. 2001 and 50.09.  2001)
• Prime Minister’s Armenia Earthquake Relief Fund
• Africa (Public Contributions – India) Fund
• Swachh Bharat Kosh (applicable from FY 2014-15)
• Clean Ganga Fund i.e. CGF  (applicable from FY 2014-15)
• National Fund for Control of Drug Abuse (applicable from FY 2015-16)

Various donations are eligible for a 50% deduction without a qualifying limit

The below-mentioned donations are eligible for a 50% deduction without the qualifying limit under Section 80G

• Prime Minister’s Drought Relief Fund
• Jawaharlal Nehru Memorial Fund
• Indira Gandhi Memorial Trust (IGMT)
• Rajiv Gandhi Foundation
• Note: Donations to the last  3 funds won’t be eligible for deduction from FY 2023-24 onwards.
• Donations to the govt  or any approved local authority or association institution to be utilised to promote family planning
• Donations made by a company to the Indian Olympic Association or any other notified institution or association established in India for developing infrastructure for sports and games in India or sponsoring sports and games in the country.

List of Donations eligible for 50% deduction subject to 10% of adjusted gross total income

The below-mentioned donations are eligible for a 50% deduction subject to 10% of adjusted gross total income.

• Any other fund or institution satisfying the conditions mentioned in Section 80G(5).
• Govt.  or any local authority, to be utilised for the purpose of charity rather than promoting family planning.
• Any authority established in India for dealing with and satisfying the requirement for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both.
• Any corporation prescribed  Section 10(26BB) for promoting the interest of the minority community.
• For renovation or repairs of any notified temple, mosque, gurudwara, church, or other places.

Eligibility for 80G Certification

Not all NGOs or trusts are eligible for 80G certification due to certain rules and guidelines regarding  the eligibility for the same conditions organisations have to meet to obtain such certification: which are discussed below –

Separation of Business and Charity: If the organisation is involved in any business apart from its charitable component, it must be segregated for receiving an 80G exemption certificate

No Misuse: The donations received for the cause shouldn’t be misused on any account or used for any other purpose, even within the organisation. Hence, all such organisations must ensure the maintenance of strict accounting principles to prove they have not misused any funds.

No Religious Activity: Any NGO or trust involved in religious preaching, or works for a particular caste or creed, isn’t eligible for 80G certification.

Proper Accounting: As mentioned earlier, organisations must maintain accurate and up-to-date accounting books and records of financial transactions as proof before applying for an 80G exemption.

Appropriate Registration: The organisation must be with registration under the Societies Registration Act 1860 or Sec-  25 of the Companies Act of 1956.

Documents required for claiming a tax deduction on donations

 Assessees intending to claim tax deduction under Section 80G must have the following documents for supporting their claim:

• Duly stamped receipt: Obtaining a receipt issued by the charity/trust to which the assessee donated the amt is mandatory. The receipt must  include details such as the  name, address, amount donated, PAN number of the trust, etc., of the doner
• Form 58: Form 58 is needed when a donor intends for claiming a 100% deduction.
• Registration no. of trust: All eligible trusts under this section are assigned a registration no by the Income Tax Department. Donors must ensure that the receipt contains the trust registration number.

Process to Claim Deductions

The process for claiming deduction under Section 80G is elaborated below:

1. The assessee must make donations to eligible funds or charitable trusts.
2.  After that, he must ensure to obtain a valid receipt or certificate of donation from the donee institution/ organization at the time of donation.
3. The next step in the process is the submission of all relevant documents required for claiming deduction while filing an income tax return.
4.  Calculation of the amount of deduction allowable under section 80G is the next step in the process.
5.   Thereafter the assessee must claim deductions on eligible donations to approved funds or charitable trusts in the applicable income tax return form.
6. Submission of the return and payment of taxes, if any are due, using the payment link provided by the e-filing website.
7.  The final step is the retention of the acknowledgment of filing the income tax return for future reference.

Key Considerations for claiming deduction under Section 80G

Some of the key considerations which must be considered by the assessee while claiming deduction u/s 80G are discussed below

• Donations made to a foreign trust aren’t eligible for deduction u/s 80G.
• Any donation made to political parties, like souvenirs, pamphlets, etc., will be ineligible for deduction under this section. However, contributions (other than cash) to political parties are eligible for deduction u/s 80GGB & 80GGC.
• All donations don’t enjoy deduction u/s 80G. Donations made to only specified funds are eligible, the names of which are enlisted above.
• An assessee can claim a deduction for donations to certain funds/ institutions under this section. For claiming a deduction, a donor shouldn’t forget to take the donation receipt, which contains the name, PAN, address, and registration number of the donee, along with the donor’s name, amount donated, and mode of payment. As the details of the donation would be required to be entered while filing ITR. Donations should be paid by any mode other than cash in case the amount of donation exceeds Rs.2000/-

Conclusion

Section 80G is a great provision for the assessees intending to contribute to society along with availing the tax benefits associated with the same. However, the assessee must be aware of all the aspects of this provision in order to avoid the rejection of their claim or any other complexities thereto. 

Read Our Article: Deduction Under Section 80G – Complete Eligibility & Benefits

1. https://www.pmindia.gov.in/en/national-defence-fund/