Despite being one of the fastest growing economies, we, as a country, are still facing issues like poverty, unemployment, lack of educational facilities for children, inadequate medical support for people with disabilities, etc.
As per reports, in the year 2015, nearly 12.4% of our population i.e. 170 million people have been living in poverty in India. Despite various government schemes and incentive programs introduced from time to time for the welfare of the needy people, there is still a huge gap between the need of funds and the availability of funds.
To cope with these grave problems, Under Section 80G was introduced in the Income tax Act, 1961. This section has been in existence from the financial year 1967-68. Section 80G provides deduction to individuals or firms/partnerships/LLP or companies for donating money to certain relief funds and charitable institutions like NGOs (Non-Government Organizations). Many NGOs have been formed and are working towards the betterment of lives of people in India.
Who can make a contribution as per section 80G?
Individuals, firms, LLPs, partnerships and companies can make contributions to welfare institutions for availing deduction under section 80G.
Are contributions made in kind eligible for deduction u/s 80G?
No. Contributions made in kind are not eligible for deduction under section 80G of the Income Tax Act.
Can I make a contribution to foreign trust?
No. Contribution made to foreign trust is not eligible for deduction under section 80G.
Can I make a contribution to political parties under section 80G?
Though you can contribute to a political party, you cannot avail deduction under section 80G. A separate section 80GGB and section 80GGC have been introduced in the Income Tax Act for making donations towards political parties.
Money donated towards political party which is registered under section 29A of the representation of people act or electoral trust can be claimed as deduction.
In case an Indian company makes a contribution towards a political party, deduction can be claimed under section 80GGB.
And if contribution is made by any other person (excluding local authority and every artificial juridical person wholly or partly funded by the government), deduction can be claimed under section 80GGC.
However, contribution should be done in cheque or demand draft or by internet banking. Donations made in cash are not eligible for deductions.
What if the contribution is deducted from the employee’s salary and the trust receipt is in the name of the employer?
Sometimes, contribution is made from the salary account of employee and the receipt is issued in the name of the employer. In such cases, the employee will have to get a certificate from the employer stating that the donation is made out of the salary account of employee. After obtaining this certificate, the employee can avail deduction for the donation made.
What should be the payment mode for availing this deduction?
Payment can be made in modes like cheque, demand draft or cash. If payment is made in cash, a maximum limit is imposed by the act.
What is the maximum amount which can be donated in cash?
Till the financial year 2016-17, a maximum limit of Rs.10,000/- on cash donations was imposed by the Income Tax Act. However, this has been changed and reduced from the financial year 2017-18. The maximum limit of donation which can be made in cash is Rs.2000/-
Can I avail the entire money contributed towards section 80G?
There are restrictions on the eligible amount for deduction. If you contribute towards specified funds, you can avail 100% deduction on the money donated otherwise you can avail 50% of the money donated.
How donations are categorized u/s 80G?
Donations or contributions are broadly categorized into 4 types:
- 100% deduction without any eligibility
- 100% deduction subject to eligible limit
- 50% deduction without any eligibility
- 50% deduction subject to eligible limit
The following are donations funds which are divided into the above four categories:
1. 100% deduction without any eligibility:
|Fund for welfare of Army/ Naval/ Air force|
|CM’s/ Lieutenant Governor’s Relief Fund regarding any State/Union Territory|
|National Illness Assistance Fund|
|National Trust for well-being of people having cerebral palsy, Autism, multiple disabilities and Mental Retardation|
|CM’s Earthquake Relief Fund, Maharashtra|
|Fund for development of technology and application|
|National Blood Transfusion Council|
|National Children’s Fund|
|Zila Saksharta Samiti|
|Fund formed for providing medical assistance to poor by state government|
|National Fund for Control of Drug Abuse|
|National Defense Fund formed by the central government|
|Andhra Pradesh CM’s Cyclone Relief Fund, 1996|
|National Sports Fund|
|Swachh Bharat Kosh|
|Approved university or educational institution of National importance like IIT, NIT etc.|
|National Cultural Fund|
|PM’s Armenia Earthquake Relief Fund|
|PM’s National Relief Fund|
|Clean Ganga Fund|
|Africa (Public Contributions – India) Fund|
|National Foundation for Communal Harmony|
|Fund formed by the Gujarat government with the purpose of providing relief only for the victims of Gujarat earthquake|
|The Maharashtra CM’s Relief Fund|
2. 100% deduction subject to eligible limitContributions made to the below authorities are eligible for 100% deduction subject to 10% of adjusted gross total income:
- Contribution made by a company to IOA i.e. Indian Olympic Association or to other notified institution/association formed in India with the purpose of developing the infrastructure for sports or for sponsoring sports in India.
- Any approved authority/institution/association established with the objective of promoting family planning
3. 50% deduction without any eligibility:
|Rajiv Gandhi Foundation|
|Jawaharlal Nehru Memorial Fund|
|PM’s Drought Relief Fund|
|Indira Gandhi Memorial Trust|
Abbreviation of PM – Prime Minister
Abbreviation of CM – Chief Minister
4. 50% deduction subject to eligible limitContributions made to the below authorities are eligible for 50% deduction subject to 10% of adjusted gross total income:
- Government/local authority established for charitable purpose except family planning
- For carrying out repairs and maintenance/renovation of notified mosque, temples, church, gurudwara or such places.
- Any corporation formed for encouraging the minority community and is referred in Section 10(26BB) of the Income Tax Act.
- Establishment or authority formed in India with the aim of providing affordable housing or for the purpose of improvement of cities/villages.
- Fund or Institution satisfying the conditions mentioned in Section 80G(5)
|Gross Total Income||XXX|
Less: LTCG i.e. Long term Capital Gains
|Less: Income earned under section 115A, 115D, 115AB/C/D which is regarding NRI and foreign companies.||-XX|
|Less: Amount deductible from sections 80CCC-80U (not including section 80G)||-XX|
|Less: Income Exempt from tax||-XX|
|Adjusted Gross Total Income||XXX|
The assessee i.e. tax payer will have to provide with the required documents for the purpose of availing deduction:
Receipt for donation
Issuing a receipt for the donations made is mandatory. The receipt should contain information about the trust and the contributor like the name and address of the trust, PAN number of the trust, name of the contributor, amount contributed by him in words as well as in figures.
If the contribution made is eligible for 100% deduction, the contributor should obtain Form 58 from the trust. Without this form, the assessee will not be eligible to get 100% deduction on the amount donated.
Registration number is being issued by the income tax department u/s 80G. This registration number should be mandatorily mentioned on the receipt of donations.
Validity of the trust registration number and a copy of 80G certificate
Generally, the registration number is issued for a period of 2 years and the trust has to renew the registration number after every two years. The registration should be in force at the time of making a donation to avail deduction u/s 80G. If the trust ceases to be valid, donations made cannot be availed as deduction.
Also, obtain a copy of 80G certificate with the receipt of donation made to the trust.
Yes. NRIs can make donations and avail deduction u/s 80G of the Income Tax Act, provided the contributions are made to eligible institutions.
So, if you want to give back to the society, you can do so by donating towards the various causes lingering our country. NGOs work towards making lives better with their work and resources play a key role in attaining their objectives. So, the next time you want to donate funds, you know what to look for and how to avail the benefits of donating under section 80G.