Deductions under Section 80G of Income Tax Act

To encourage the donation towards various Trusts and Charitable Institutions, Government of India provides deduction in respect of such deductions under Section 80G of the Income Tax Act for Tax Exemption.

These donations provide tax benefits for Trust / Charitable Institutions to accumulate funds and fulfill their goals, which are in the interest of society.

Who can claim deduction under section 80G?

Every individual who makes a donation towards specified institutions can claim deduction, whether that being an Individual, HUF, Partnership, Firm, Company, etc.

Conditions for claiming deduction under Section 80G:

  1. Donations made in the form of money only are eligible for deduction. Donations made in kind do not qualify for deduction.
  2. Donations above Rs. 10000 are allowed as deduction only if the payment is by Cheque, DD, etc. Payments above Rs. 10000 in cash are not allowed as deduction.
  3. The donor is required to furnish proof of payment to claim the deduction. A stamped receipt is issued by the Donee of a Trust/ Charitable Institution which serves as a proof.

    4. The receipt must contain the following details:

    • Name and address of the Donee.
    • Name of the Donor.
    • Donated amount (amount in words and figures must match).
    • Registration number of the Trust/ Charitable Institution under Section 80 G of Income Tax Act along with its validity.

Eligible amount of deduction under Section Section 80G:

Deduction allowed under Section 80G varies with the Institution to which the donation has been made. The deduction can be summed up in the following cases:

Case Donation Made To Eligible Amount
Case 1 Donations to
  1. Funds such as Prime Minister Relief Fund
  2. Chief Minister’s Relief Fund
  3. View Complete List
 Flat 100 % of the donated amount
Case 2 Donations to funds
  1. Such as Jawaharlal Nehru Memorial Fund
  2. Chief Minister’s Relief Fund
  3. View Complete List
 Flat 50% of the donated amount
Case 3 Donations to Government or Local Authority or the purpose of promoting family planning and sums paid by a company to Indian Olympic association 100 % of the amount donated or qualifying limit whichever is lower
Case 4 Donations to other Charitable Trust , Institutions or Associations 50% of the amount donated or 50% of the qualifying limit whichever is lower

How to calculate qualifying limit and adjusted gross total income under Section 80G?

The qualifying limit is 10% of adjusted Gross Total Income. The adjusted Gross Total Income is calculated in the following way:

  1. Compute the Gross Total Income.
  2. Add the following amount.
    • Deductions under Section 80C to 80U (excluding Section 80G).
    • Long Term Capital Gains.
    • Short Term Capital Gains under Section 111A taxable @15%.
    • Income under Section 115A, 115AB, 115AC or 115AD in case of Non-Resident.
  3. Deduct the added figure as computed in step 2 from the amount in step 1 to arrive at Adjusted Gross Total Income.
  4. The qualifying limit is 10% of Adjusted Gross Total Income as computed in step 3.

Example

Consider the following data of Mr. A for the Financial Year 2013-14.

Salary is Rs. 6, 00, 000 and the Interest is Rs. 40,000.

  1. Amount contributed to PPF (Section 80C deduction) : Rs. 50,000.
  2. Amount paid for Medical Insurance (Section 80D deduction): Rs. 7,000.
  3. Donation to Charitable Trust: Rs. 70,000
  4. Since the donation is to a Charitable Trust, the Deduction under Section 80 G will be calculated under case 4 as discussed above. Accordingly, let us determine the qualifying limit based on the following steps:
  • Gross total income = > Rs. 6, 40,000/- (Rs. 6, 00,000 + Rs. 40, 000).
  • Total up all deductions => Rs. 57000 in this case (Rs. 50, 000 + Rs. 7, 000).
  • Adjusted Gross Total => Rs. 5, 83,000 (Rs. 6, 40,000 - Rs 57, 000).
  • Qualifying Limit => 10% of Rs. 5, 83, 000 which is Rs. 58, 300.

Therefore, the lower amount of Rs. 29, 150 is eligible for deduction under Section 80G of Income Tax Act. You can save tax by donating to Charity.

How to claim Deduction under Section 80G?

  1. If you are a salaried Employee, you must report the amount of donation to your Employer along with the donation receipt. Ensure that the Institution to whom you have donated should be registered under Section 80G of Income Tax Act.
  2. During efiling of Income Tax Return, do not forget to mention the donation details in the appropriate field of ITR along with the following details: Name of the Donee, PAN of the Donee, and Address of the Donee.

Other points to note

  1. Donations made to the political parties are not allowed as deduction under Section 80G of Income Tax Act. However, the similar case is allowed as deduction under Section 80GGB and 80GGC.
  2. Non-Resident Indians (NRI’S) can also claim deduction under Section 80G of Income Tax Act.
  3. A donation to Foreign Trust is not allowed as deduction under Section 80G of Income Tax Act.

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