Maximizing Tax Benefits with Section 80G Donations

Summary: Section 80G of the Income Tax Act offers tax benefits for donations made to specific funds, charitable institutions, or trusts. Taxpayers eligible to claim these deductions include individuals, firms, LLPs, companies, HUFs, NRIs, and others, but only those opting for the old tax regime. Donations made via cash (up to INR 2,000), cheque, or demand draft are eligible. Donations in kind or cash above INR 2,000 are not deductible. Deductions can be categorized into 100% or 50% eligibility, with or without qualifying limits. Notably, donations to national funds like the Prime Minister’s National Relief Fund, National Sports Fund, and others are eligible for a full deduction, while contributions to organizations like the Prime Minister’s Drought Relief Fund qualify for 50%. Donations to temples are only deductible if made for renovation or repair. The qualifying limit for donations with limits is 10% of adjusted total income. To claim deductions, taxpayers must secure receipts containing essential details like the trust’s PAN, registration number, and the donation amount.

Deduction under section 80G of the Income Tax Act is available in respect of donations to specified funds, charitable institutions, trust, etc. The present article covers detail explanation on deductions available under section 80G of the Income Tax Act.

Eligibility of deduction under section 80G of the Income Tax Act

Following categories of taxpayers are eligible for claiming deduction u/s. 80G –

• Individual;
• Firm/ LLP;
• Company;
• HUF – Hindu Undivided Family;
• NRI – Non-Resident Indian;
• Any other person.

Importantly, donations made to prescribed funds are only eligible for deduction u/s. 80G of the Income Tax Act. Further, deduction is available only to the taxpayer opting under old tax regime. Thus, taxpayer opting under new tax regime are not eligible to claim deduction u/s. 80G.

Allowable mode of payment for claiming deduction under section 80G of Income Tax Act

Donation via following mode of payments are eligible for deduction u/s. 80G –

• Cash [donation only up to INR 2,000];
• Cheque;
• Demand draft.

Notably, donation in cash above INR 2,000 doesn’t qualify for deduction u/s. 80G. Further, donation in kind [i.e. donation of food, medicine, clothes, etc.] doesn’t qualify for deduction u/s. 80G.

Prescribed funds which are eligible for deduction under section 80G of Income Tax Act

Funds are divided into following four categories based on which either 100% or 50% deduction is available to the taxpayer u/s. 80G –

1. Donations eligible for 100% deduction without qualifying limit;

2. Donations eligible for 50% deduction without qualifying limit;

3. Donations eligible for 100% deduction with qualifying limit;

4. Donations eligible for 50% deduction with qualifying limit.

Donations eligible for 100% deduction without qualifying limits are highlighted hereunder –

• National Relief Fund of Prime Minister;
• National Defence Fund by the Central Government;
• National Foundation for Communal Harmony;
• National Illness Assistance Fund;
• National Sports Fund;
• National/ State Blood Transfusion Council;
• National Trust for Welfare of people with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities;
• National Children’s Fund;
• National Cultural Fund;
• Approved educational institution/ university of National eminence;
• Zila Saksharta Samiti established under any district under the chairmanship of District Collector;
• Fund, for medical relief to the poor, set up by the State Government;
• Fund for development of technology and applications;
• Relief Fund of Chief Minister or Relief Fund of Lieutenant Governor regarding any State/ Union Territory;
• Chief Minister of Maharashtra’s Earthquake relief fund;
• Chief Minister of Maharashtra’s relief fund during 1^st October 1993 and 6^th October 1993;
• Indian Naval Benevolent Fund or Army Central Welfare Fund or Air Force Central Welfare Fund or Chief Minister of Andhra Pradesh’s Cyclone Relief Fund in 1996;
• Any fund established by the State Government of Gujarat specifically for providing relief to earthquake victims in Gujarat;
• Prime Minister’s Armenia Fund for earthquake relief;
• Africa, Public Contributions – India, Fund;
• Any fund or institution or trust to which section 80G(5C) applies to provide relief to earthquake victims in Gujarat [contribution made between 26^th January 2001 and 30^th September 2001;
• National fund for control of drug abuse [from Financial Year 2015-2016];
• Clean Ganga Fund [from Financial Year 2014-2015];
• Swachh Bharat Kosh [from Financial Year 2014-2015];

Donations eligible for 50% deduction without qualifying limits are highlighted hereunder –

• Prime Minister’s Drought Relief Fund.

Notably, donations to Jawaharlal Nehru Memorial Fund, Rajiv Gandhi Foundation and Indira Gandhi Memorial Trust are eligible for deductions only till Financial Year 2022-2023. Eligibility for the same is discontinued from Financial Year 2023-2024 onwards.

Donations eligible for 100% deduction with qualifying limits are highlighted hereunder –

• Donation to government institution or association or any approved local authorities utilized to encourage family planning;
• Donation by Company to the Indian Olympic Association or any notified institution/ association which is established in India for developing infrastructure for games and sports in India or sponsoring games and sports in India.

Donations eligible for 50% deduction with qualifying limits are highlighted hereunder –

• Any fund or institution which satisfies the conditions laid down in Section 80G(5) of the Income Tax Act;
• Any corporation specified in Section 10(26BB) of the Income Tax Act to promote interest of minority community;
• Donation to government or any local authorities for utilizing towards any charitable purpose other than encouraging family planning;
• Any authority constituted in India for dealing with and satisfying the need for residential accommodation or for the purpose of development or planning or improvement of villages, cities, towns or both;
• Donation for renovation or repair of any notified temple, gurudwara, church, mosque or other places.

Understanding qualifying limit under section 80G of the Income Tax Act –

Qualifying limit means 10% of adjusted total income. Steps for calculating qualifying limit and eligible deduction are highlighted hereunder –

STEP 1 – Calculate Adjusted Total Income in the following manner –

STEP 2 – Calculate Qualifying limit –

Qualifying Limit = 10% of Adjusted Total Income

STEP 3 – Calculate actual donation which is allowable subject to qualifying limit;

STEP 4 – Eligible deduction with qualifying limit will be lower of STEP 2 and STEP 3.

List of documents required for claiming deduction under section 80G of the Income Tax Act –

• Donation receipt –

It is mandatory to obtain duly stamped donation receipt from the trust. The receipt should contain the following details –

• Name of the trust;
• Address of the trust;
• PAN of trust;
• Registration number of the trust;
• Name of the donor;
• Amount of donation;
• Payment mode.

• Trust Registration Number on the receipt –

It is mandatory that the donation receipt must contain valid registration number of the trust.

• Photocopy of trust’s 80G certificate –

It is advisable to get photocopy of the trust’s 80G certificate.

Frequently Asked Questions (FAQs) on Section 80G Deductions-

Some of the relevant Frequently Asked Questions with regard to deduction under section 80G are highlighted hereunder –

1. How much is an 80G exemption?

Deduction u/s. 80G is categorised in different parts i.e. donations eligible for 100% or 50% deduction without qualifying limit and donations eligible for 100% or 50% deduction with qualifying limit.

2. What is the limit for Section 80G donation in cash?

Donation up to INR 2,000 in cash is allowable as deduction under section 80G of the Income Tax Act.

3. How to calculate 80G qualifying limit?

For calculating 80G qualifying limit, Gross Total Income is to be reduced by the following –

• Amount deductible u/s. 80C to 80U [except 80G];
• Short Term Capital Gain u/s. 111A;
• Long Term Capital Gain;
• Exempt income;
• Income u/s. 115A(1)(a), 115AB, 115AC and 115D.

4. Is 80G exemption 50 or 100?

Donations specified under section 80G are eligible for 100% or 50% deduction with or without qualifying limit. Hence, 50 or 100 exemption u/s. 80G is based on the type of donations.

5. Is donation to Temple eligible for 80G?

Donations to temple for the purpose of renovation or repair is only eligible for deduction u/s. 80G. Thus, any donation to temple other than for renovation or repair is not eligible for deduction u/s. 80G.