All taxpayers who donate money to prescribed funds, institutions or associations are eligible for a deduction under Section 80G. However, this deduction can be claimed only under the old tax regime. Taxpayers who opt for the new tax regime cannot avail of this benefit.
How much can be claimed?
The deduction is allowed as follows:
- 100% without maximum limit
- 50% without maximum limit
- 100% subject to a maximum limit
- 50% subject to a maximum limit
The first step is to check the category under which the fund or charitable institution falls. This will help determine the deduction percentage and whether the deduction is subject to a limit. Payments to certain institutions are eligible for 100% or 50% deduction without any qualifying limit. However, in some instances, you must first determine the maximum qualifying limit, which is eligible for deduction. If the total amount donated to those specified funds or institutes exceeds 10% of your adjusted gross total income (GTI), any excess amount beyond the 10% limit will not be eligible for deduction.
Adjusted GTI shall be computed after reducing the following from your GTI:
- Amount deductible under Section 80C to 80U (Except Section 80G)
- Share of profit in Association of Persons eligible for rebate u/s 86
- Long-term capital gains
- Short-term capital gain arising from securities specified under Sec 111A
- Any income referred to in Sec 115A, 115AB, 115AC, 115ACA, 115AD and 115D Let’s assume your gross total income for the year is Rs.10 lakh. You have made donations of Rs.90,000 to NGOs which are eligible for a 50% deduction subject to a qualifying limit of 10%. Additionally, you have claimed deductions of Rs.1.5 lakh under Sec 80C and earned short-term capital gains of Rs.1 lakh from the sale of equity shares.
To calculate the maximum amount allowable under Sec 80G, you must first compute your adjusted gross total income. This is your gross total income GTI) reduced by deductions under Section 80C and short-term capital gains under Section 111A, which in this case is (Rs.10 lakh minus Rs.1.5 lakh and Rs.1 lakh) = Rs.7.5 lakh. Next, you need to calculate the qualifying limit for your donations under Sec 80G, which is 10% of your adjusted gross total income. In this case, the qualifying limit is Rs.75,000 ( 10% of Rs.7.5 lakh). The maximum amount allowable under Section 80G shall be 50% of the lower of
- the amount donated (Rs.90,000) or
- the qualifying limit (Rs.75,000). In this case, the lower amount is the qualifying limit of Rs.75,000. Therefore, the maximum deduction allowable under Secn 80G is 50% of Rs.75,000, which comes out to be Rs.37,500. Hence, you can claim a deduction of Rs.37,500 under Section 80G for the donations made to eligible NGOs
Mode of donation
You can claim a deduction for donations made in cash or cheque or electronic modes. Cash donations exceeding Rs.2,000 are not eligible for deduction. Donations made in kind are not eligible for deduction.
Proof to claim a deduction
To claim a tax deduction, a person must donate to a fund or institution that meets the conditions specified under the Income Tax Act. One condition is that the recipient must file a donation statement with the IT department and provide the donor with a Form 10BE certificate specifying amount. A certificate in Form 10BE is required as evidence to support the deduction to be claimed while filing ITR. The deduction will only be allowed if the donation information is provided by the fund or institution to the income-tax department.
Know deduction eligibility Funds eligible for 100% deduction without limit
- National Defence Fund
- PM National Relief Fund
- PM CARES FUND
- National Children’s Fund
- CM Relief Fund or the Lt Governor’s Relief Fund
- Zila Saksharta Samiti
- Army Central Welfare Fund
- Naval Benevolent Fund
- Air Force Central Welfare Fund
- Andhra Pradesh CM Cyclone Relief Fund
- National Sports Fund
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
- Swachh Bharat Kosh
- Clean Ganga Fund (not being in pursuance of CSR)
- National Fund for Control of Drug Abuse
- National Illness Assistance Fund
- National Blood Transfusion Council or State Blood Transfusion Council
- Fund set up by a state for medical relief to the poor
- National Cultural Fund
- Fund for Tech Development and Application
- National Foundation for Communal Harmony
- PM Armenia Earthquake Relief Fund
- Africa (Public Contributions – India) Fund
- CM Earthquake Relief Fund, Maharashtra
- A university or educational institution of national eminence approved by the tax authorities
- Fund set up by Gujarat exclusively for providing relief to the victims of earthquake in Gujarat.
Funds eligible for 50% deduction without limit
- Jawaharlal Nehru Memorial Fund
- PM Drought Relief Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation The Finance Act of 2023 states that donations made to Jawaharlal Nehru Memorial Fund, Indira Gandhi Memorial Trust and Rajiv Gandhi Foundation will no longer be eligible for deduction under Section 80G. Any donation made to these funds on or after 1 April 2023 will not be eligible for deduction.
Funds eligible for 100% deduction subject to limit
- Family Planning Association of India/Red Cross Society of India
- Government or any approved local authority, institution or association to be utilised for promoting family planning.
- Indian Olympic Association or to any other notifi ed association or institution established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India.
- The deduction for donations to these institutions is allowed only to a company and not to individuals.
Funds eligible for 50% deduction subject to limit
- Notified temple, mosque, gurudwara, church or other place (for repairs or renovation)
- Government or any local authority to be utilised for charitable purpose other than promoting family planning
- Any corporation specified in Section 10(26BB) for promoting interest of minority community
- Any authority constituted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both.
- Any other fund or any institution fulfi lling the conditions as specifi ed in Section 80G(5)List of institutions eligible to receive donations under Sec 80G is updated periodically. Confi rm whether the institution is on the approved list at the time of making donation.
(THE WRITER IS A CHARTERED ACCOUNTANT AND HEAD OF DIRECT TAX PRACTICE AT COHERENT ADVISORS.)
