Section 80G: Your Guide to Charitable Giving and Tax Savings

Charitable donations not only contribute to noble causes but also offer significant tax-saving opportunities under Section 80G of the Income Tax Act. Whether you’re an individual taxpayer or a business, understanding the tax benefits of charitable donations is essential. In this guide, we’ll break down everything you need to know about Section 80G deductions, how they work, and how you can make the most of your charitable contributions.

What is Section 80G?

Section 80G provides taxpayers with the opportunity to reduce their taxable income by claiming deductions for donations made to eligible charitable institutions. This provision incentivizes individuals and businesses to contribute to causes such as education, healthcare, poverty alleviation, and more.

Eligibility for Section 80G Deduction

To claim a deduction under Section 80G, donations must be made to a registered charitable organization or institution. The institution must be approved by the Income Tax Department to qualify for the deduction. Donations to certain institutions, such as those focused on scientific research or rural development, may even qualify for 100% deductions. Below is a list of eligible taxpayers who can get a tax deduction:

Individuals

Companies

Firms

Hindu Undivided Firm (HUF)

Non-Resident Indian (NRI)

Any other person

Eligibility for Section 80G Deduction

To claim a deduction under Section 80G, donations must be made to a registered charitable organization or institution. The institution must be approved by the Income Tax Department to qualify for the deduction. Donations to certain institutions, such as those focused on scientific research or rural development, may even qualify for 100% deductions. Below is a list of eligible taxpayers who can get a tax deduction:

Individuals

Companies

Firms

Hindu Undivided Firm (HUF)

Non-Resident Indian (NRI)

Any other person

Maximizing Your Tax Benefits with Section 80G

Donating to charity not only helps those in need but also helps reduce your taxable income, allowing you to maximize tax savings. By strategically planning your charitable contributions and ensuring that your donations go to the right causes, you can enjoy significant financial benefits under Section 80G.

To make sure you’re getting the maximum deduction, consider the following tips:

• Diversify Donations: Consider donating to both institutions that qualify for 100% and 50% deductions to balance your tax savings.
• Plan Ahead: Make donations early in the year to avoid last-minute contributions that may not be well planned.

Mode of payment

Section 80G allows people to get tax deductions when they give money to charity in any of the following ways:

• Check
• Demand draft
• Cash (if the donation is less than Rs. 2000)
  Remember that In-kind donations, such as food, materials, clothes, medicines, etc., and donations of more than Rs 2,000 cannot be deducted under Section 80G. Section 80G says that donations over Rs 2,000 should be made in a way other than cash.
  Section 80G says that you can deduct up to 100% or 50%, with or without limits, for the different kinds of donations it lists.

Types of Donations and Deduction Limits

Section 80G allows two main types of deductions: 100% deductions and 50% deductions. The deduction percentage depends on the institution or cause you’re donating to. Here’s a breakdown of the types of donations and their respective limits:

• 100% Deduction (without restriction): Donations to national charities, such as the Prime Minister’s National Relief Fund, or specific educational institutions.
• 50% Deduction (without restriction): Donations to other qualified institutions, including certain relief funds and registered NGOs.

However, it's important to note that while donations to specific organizations qualify for the full 100% deduction, the amount is subject to the overall limit of 10% of your total income.

Example of 100% Deduction:

If you donate Rs 50,000 to a cause eligible for 100% deduction, you can claim the entire Rs 50,000 as a deduction on your tax return, reducing your taxable income by that amount.

Example of 50% Deduction:

For a donation of Rs 20,000 to a cause eligible for 50% deduction, you can claim Rs10,000 as a tax deduction.

How to Claim Section 80G Deduction

To claim a deduction under Section 80G, follow these steps:

1. Ensure the Institution is Eligible: Before donating, confirm that the recipient institution is registered and authorized under Section 80G. You can do this by checking their 80G certificate.
2. Obtain a Receipt: Always get a valid receipt for the donation. The receipt should include details such as the institution’s registration number, the amount donated, and the type of deduction (100% or 50%).
3. Fill in the Donation Details: When filing your income tax return, include the details of your donation under the section for charitable donations. Ensure that you mention the institution’s registration number and the amount donated.

All the above information must be filled out in the ITR forms.

Table A: Donations that qualified for a 100% tax deduction without any limits

Table B: Donations that qualify for a 50% tax deduction without a limit.

Table C: Donations that qualify for a 100% tax deduction are subject to a specific limit.

Table D: For donations that qualify for a 50% tax deduction, subject to a limit

List of donations qualified for 100% deduction without limit.

• National Defence Fund set up by the Central Government.
• Prime Minister's National Relief Fund.
• National Foundation for Communal Harmony.
• An approved university/educational institution of National eminence.
• Zila Saksharta Samiti is constituted in any district under the chairmanship of the Collector of that district.
• Fund set up by a state government for medical relief to the poor.
• National Illness Assistance Fund.
• National Blood Transfusion Council or any State Blood Transfusion Council.
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities.
• National Sports Fund.
• National Cultural Fund.
• Fund for Technology Development and Application.
• National Children's Fund.
• Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to 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 set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat.
• Any trust, institution, or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made between January 26, 2001, and September 30, 2001).
• Prime Minister's Armenia Earthquake Relief Fund.
• Africa (Public Contributions – India) Fund.
• Swachh Bharat Kosh (applicable from FY 2014-15).
• Clean Ganga Fund (applicable from FY 2014-15).
• National Fund for Control of Drug Abuse (applicable from FY 2015-16).

List of donations qualified for 50% deduction without limit

Prime Minister's Drought Relief Fund

Jawaharlal Nehru Memorial Fund

Indira Gandhi Memorial Trust

Rajiv Gandhi Foundation

List of donations qualified for 100% deduction subject to 10% of adjusted gross total income

Donations to the government or any approved local authority, institution, or association to be utilized to promote family planning

Donation by a company to the Indian Olympic Association or any other notified association or institution established in India to develop infrastructure for sports and games in India or sponsor sports and games in India.

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

Any other fund or institution satisfies the conditions mentioned in Section 80G(5).

Government or any local authority, to be utilized for any charitable purpose other than promoting family planning.

Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development, or improvement of cities, towns, villages, or both.

Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community.

For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.

Calculation of 80GG

The penalty for 80GG will be the lowest of the following:
5,000 rupees per month
25% of the total income after adjustments
Actual rent - 10% of total income after being adjusted

In conclusion, Section 80G offers a great opportunity for taxpayers to make a positive impact while reducing their tax liabilities. By understanding the various types of eligible donations and keeping track of the institutions, you contribute to, you can make the most of this valuable tax benefit. So, whether you're supporting education, healthcare, or disaster relief, don’t forget to claim your Section 80G deduction and enjoy the financial rewards.