The IT Department of India has maintained various provisions for common men to reduce their tax liabilities for the A.Y. 2018-19 & 2019-20 through deduction under Section 80.
This section is further divided into sub-sections which offers different scopes of claiming deductions.
In this article, we will be discussing about deduction 80G and how to avail benefits from the same.
What is Deduction U/s 80G?
For a common man, Section 80G is an opportunity to claim deduction by way of making donations and charity. A person who has made donations or charity in the AY 2018-19 & A.Y.2019-20, can claim the same as a deduction while filing his IT return. This section is applicable to individuals, firms and even companies. However, it should be noted that deduction is only available under cases where donation/ charity has been made to an organization which has Government recognition.
Let’s take an example to make things clear. Suppose Mr. Ramesh has made a donation to APSWDP for INR 50, 000 in the AY 2018-19 & A.Y. 2019-20 Now, he can claim the same amount as deduction because APSWDP is a recognized organization by Government. Issues such as helping a poor person, donating to beggar, etc., are not under the purview of this section.
How to Claim Deduction Under Section 80G?
Deduction under Section 80G is computed on the basis of gross total income. As a tax payer, first your gross salary is taken and then deduction in respect of PPF (Public Provident Fund) and CPF (Company Provident Fund) is made. The end result is Gross Total Income. To illustrate:
Gross Income – Contributions to PFF and CPF = Gross Total Income.
Now, deduction under Section 80G is available on the amount which is lower of the two mentioned below:
- Donated Amount, or
- 10% of Gross Total Income
The lower of the two amount will qualify as deduction. However, there is an additional clause attached to the whole scenario. Various donation have different exemption limit. Some donations may have 100% deductions, whereas some have 50% deductions. Donation to private organizations mainly offer 50% deductions. Hence, the amount qualified as deduction will be reduced to half and will be applied as a deduction.
An example will make things crystal clear. Mr. Roshan has a gross income of INR 1, 00, 000. He has made contributions to PFF and CPF with INR 10, 000 and 5, 000 respectively. He has also made a donation to a private charitable organization worth INR 20, 000. So, what deductions can he available under Section 80G?
In this case, we will first compute Gross Total Income.
INR 1, 00, 000 – (10, 000 + 5, 000) = INR 85, 000
Now, we need to check the second condition, where we will compare donation amount and 10% of the gross total income. In the present case, donation is INR 20, 000 and 10% of the Gross income is INR 8, 500. Therefore, INR 8, 500 will qualify as the amount for deduction under 80G as it is lower.
Now the final step to get deduction 80G is here– only 50% of INR 8, 500 will be available as deduction because as per IT Act, a tax payer can get only 50% deduction while making donation in a private organization. If the organization belonged to the government, then 100% deductions would have been available.
Eligibility for Deduction under Section 80G
The IT Department of India demands proof for donations. Therefore, there are two things which should keep in mind-
- Receipt of Donation– Every Government recognized trust issues a receipt for donation received. As a tax payer, you are required to show those receipts to the IT Department at the time of claiming deduction under Section 80G. Failure to do so, will result into cancellation of deduction.
- Donations in Cash/ Cheque is only acknowledged– Donation in kind/favour is not acknowledged by the IT Department. For a tax payer, donations should be either made in Cash or Cheque, any other does not qualifies for deduction.
The scope of Section 80G is an important area of claiming deduction. As a tax payer, you can immediately take advantage of this section without getting into complexities of investments.
100% deduction is allowed in respect of donations to:
Allowable to: An assessee who has made donation to a specified institution- during the year. Amount of Deduction:
(1) 100% deduction is allowed in respect of donations to:
(1) National Defence Fund,
(ii) Prime Minister’s National Relief Fund,
(iii) Armenia Earthquake Relief Fund,
(iv) Africa (Public Contributions India) Fund,
(v) National Children’s Fund,
(vi) National Foundation for Communal Harmony,
(vii) an approved University or educational institution of national eminence,
(viii) Chief Minister’s Earthquake Relief Fund, Maharashtra,
(ix) any fund set up by the Government of Gujarat exclusively for providing relief to earth-quake victims,
(x) a Zila Saksharta Samiti constituted for improvement of primary education and literacy in villages and towns,
(xi) the National Blood Transfusion Council or any State Blood Transfusion Council, NO any State Government Fund for providing medical relief to the poor,
(xiii) the Army Central Welfare Fund / Indian Naval Benevo-lent Fund/Air Force Central Welfare Fund,
(xiv) the Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996,
(xv) the National Illness Assistance Fund,
(xvi) the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund of any State or Union Territory,
(xvii) the National Sports Fund,
(xviii) the National Cultural Fund,
(xix) the fund for Technology Development and Application,
(xx) the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retar-dation and Multiple Disabilities,
(xxi) the Swachh Bharat Kosh,
(xxii) the’ Clean Ganga Fund,
(xxiii) the National Fund for Control of Drug Abuse,
(xxiv) the Government or any approved local authority, institution or association for promoting family planning, and
(xxv) Indian Olympic Association or any other notified association/institution for development of infrastructure or sponsorship of sports and games in India (donations by a company).
50% deduction is allowed in respect of donations to:
(i) Jawaharlal Nehru Memorial Fund,
(ii) Prime Minister’s Drought Relief Fund,
(iii) Indira Gandhi Memorial Trust,
(iv) Rajiv Gandhi Foundation,
(v) Any fund or institution established in India for a charitable purpose as is referred to u/s 80G(5),
(vi) any fund or institution established in India for a charitable purpose which incurs expenditure, maximum 5% of its income, for a religious purpose u/s 80G(5B),
(vii) Government or local authority for charitable purposes (other than promotion of family planning),
(viii) an authority for town planning and housing, etc.,
(ix) any ‘ Corporation established by the Central/State Government for promoting the interest of the members of a minority community,
(x) any temple, mosque, gurdwara, church or other place of worship which is of historic, archaeological or artistic importance, and
(xi) donations during 26.1.2001 to 30.9.2001 for providing relief to earthquake victims in Gujarat, to any trust, institution or fund established for a charitable purpose u/s 80G(5C).
(1) If the aggregate of donations made by the asses-see, to institutions/funds referred to in clauses (xxiv) and (xxv) of Para (1) above and in clauses (v), (vi), (vii), (viii), (ix) and (x) of Para (2) above, exceeds 10% of his gross total income, such excess shall not qualify for deduction.
Note: ‘Gross total income’ for this purpose shall be reduced by following amounts:
(i) deductions allowable u/ss 80C to 80U (except 80G);
(ii) income on which tax is not payable; [Sec. 80G(4)]
(iii) long-term capital gains; [Sec. 112(2) and 112A(7)]
(iv) short-term capital gains taxable u/s 111A; [Sec. 111A(2)]
(v) incomes referred to u/s 115A, 115AB, 115AC or 115AD, in relation to certain non-residents/foreign companies.
(2) Donation of a sum exceeding Rs. 2,000 shall be eligible for deduction, only if it is paid by a mode other than cash.
(3) Amount spent in pursuance of Corporate Social Responsibility u/s 135(5) of the Companies Act, 2013 shall not be treated as donation to Swachh Bharat Kosh or Clean Ganga Fund.
(4) Donation to Clean Ganga Fund by resident assessees only ,shall be eligible for deduction..
Notes: (1) Donations need not be made out of current year’s income.
(2) It has been clarified that where employees make donations to the Prime Minister’s National Relief Fund, the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund through their respective employers, the claim in respect of such donations will be admissible u/s 80G on the basis of the certificate issued by the DDO/ Employer in this behalf.’
Section 80G Updates
- Updated on 04-08-2017: Deduction u/s 80G cannot be allowed respect of donations by way of clothes sent to the PMNRF, being in kind and not in cash, cheque or draft (Nahar Spinning Mills Ltd. vs Commission or Income-Tax) 2017(8) TMI 125 – Punjab and Haryana High Court – Download or View Online