Learn about the meaning of donation under the Income Tax Act, 1961, and explore the types of donations, deductions, and conditions for claiming them in India.
The meaning of DONATION is Do anything for Nation. So far Income Tax is concern the meaning of Donation means do anything for us. Recently we have seen that more than 8000 notices were issued by the Income Tax Department to the donors, who have given donations to political parties, which find to be a bogus donations.
Under the Income Tax Act, there are three types of donations:
- Donations to certain funds, charitable institutions, etc.; deduction under section 80G;
- Donations for scientific research or rural development; under section 80GGA;
- Contributions given by companies to political parties; deduction under section 80GGB;
- Contributions given by any person to political parties; under section 80GGC.
SECTION 80G:
The deductions under this section are different for certain donations. Certain donations are 100% deductible, while certain donations are 50% deductible.
Donations given to following trust or fund is 100% deductible from gross income of all types of assesses.
- National Defense Fund set up by the Central Government,
- The National Children’s Fund,
- Jawaharlal Nehru Memorial Fund,
- Prime Minister’s Drought Relief Fund,
- Indira Gandhi Memorial Trust,
- Rajiv Gandhi Memorial Trust
Donations given to the following trust or fund is deductible 50% of qualifying amount. Qualifying amount means 10% of gross total income.
- The Prime Minister’s National Relief Fund
- The Prime Minister’s Armenia Earthquake Fund,
- The Africa (Public Contribution- India)Fund,
- The National Foundation for Communal Harmony,
- University or any educational institute of national eminence as may be approved by the prescribed authority
- Chief Minister’s Earthquake Relief Fund, Maharastra,
- Any Zila Sakshartha Samiti constituted in any district under the chairmanship of the Collector of that district, for the purpose of improvement of primary education in villages and towns in such district and for literacy and post literacy activities,
- National Blood Transfusion Council or to any State blood Transfusion Council, which has its sole object the control, supervision or encouragement in India of the services related to operation and requirement of Blood Banks.
- Any fund set up by a State Government to provide medical relief to the poor,
- Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of the past and present of such forces or other dependent,
- Andhra Pradesh Chief Minister’s Cyclone Relief Fund,1996,
- National Illness Assistance Fund,
- Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union territory,
- National Sports Fund to be set up by the Central Government,
- National Cultural Fund set up by the Central Government,
- Fund for the Technology Development and Application set up by the Central Government,
- Company to the Indian Olympic Association or to any other association/institution established in India and notified for development of infrastructure for sports and games in India or the Sponsorship of sports and games in India,
- Fund set by the State Government of Gujarat exclusively for providing relief to the victims of Earthquake in Gujarat,
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities consulted u/s 3(1) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act,1999,
- Swachchh Bharat Kosh set up by the Central Government, other than sum spent by the assesse in pursuance of Corporate Social Responsibility u/s135(5) of the Companies Act, 2013,
- Clean Ganga Fund, set up by the Centeral Government, where such assesse is a resident and such sum is other than the sum spent by the assesse in pursuance of Corporate Social Responsibility u/s 135(5) of the Companies Act 2013,
- National Fund for control of Drug Abuse constituted u/s 7A of the Narcotic Drugs and Psychotropic Substances Act, 1985,
- Government or any such local Authority, institution or association as may be approved by the Central Government, to be utilized for the purposes of promoting Family Planning.
All the above donations must be to those approved institutions or funds established in India for Charitable Purpose and fulfilling the conditions prescribed under the Income Tax Act, u/s 80G(2)(a)(iv) read with section 80G(5)
Donations made by an assessee to association or institution having as its object the control, supervision, regulation or encouragement in India of notified games or sports will be regarded as donation made to institutions established in India for a charitable purpose and will qualify for deduction u/s 80G.
50% of qualifying deduction:
Presume that Mr. ‘A’ has given donation of Rs.1,00,000 to the institute approved u/s 80G(5) of the Act., whether he will get deduction of Rs. 1,00,000? To calculate qualifying amount, ‘A’ will have to calculate his gross total income, say Rs.7,50,000
Here the qualifying amount will be:
| 10% of Rs. 7,50,000 | Rs. 75,000 |
| 50% of Rs. 75,000 | Rs. 37,500 |
Total donation Rs. 1,00,000 50% of Rs. 1,00,000 will be Rs.50,000
But Mr.’A’ will get deduction of Rs. 37,500 and not Rs. 50,000
SECTION 80GGA:
Under this section 80GGA, assessee will get deduction in respect of certain donations made for scientific research or rural development.
- Any sum paid u/s 80GGA(2) by an assesee in the previous year to a research association which has as its object the undertaking of scientific research or to a University, college or other institution to be used for scientific research which are approved u/s 35(1)(ii)
- Research in Social science or statistical research approved u/s 35(1)(iii)
- programme of rural development approved for the purposes of Section 35CCA
- Object of training of persons for implementing programmes of rural development approved u/s 35CCA(2A)
- A public sector company or a local authority or to an association or an institution approved by the National Committee referred to Section 35CCA(2)(a)
- A rural development fund set up and notified by the Central Government for the purposes Section 35CCA(1)©
- National Urban Poverty Eradication Fund(NUPEE) set up by and notified by the Central Government for the purposes of 35CCA(1)(d)
The above amount shall be deducted in computing the total income of an assessee subject to the following conditions:
(i) Deduction under this section is not admissible in the case of an assessee whose gross total income includes income under the head “Profit and Gains of business or peofession”
(ii) where a deduction under this section is claimed and allowed in any assessment year, the same eduction shall not be allowed under any other provisions of the Act.
Full amount of donation will be deductible from gross income.
Please remember that deduction will not be allowed, in respect of donation of sum exceeding Rs. 2,000 paid in cash.
SECTION 80GGB:
Under this section deduction in respect of contribution given by companies to political party or to an electoral trust is allowed. In computing the total income of an assesse, being an Indian Company, there shall be deducted any sum contributed to any political party or an electoral trust.
Deduction under this section shall not be allowed in respect of any sum contributed by way of cash.
SECTION 80GGC:
Under this section deduction in respect of contribution given by any person except local authority and every artificial juridical person, to political party or electoral trust funded by Government to political parties is allowed.
Deduction under this section shall not be allowed in respect of any sum contributed by way of cash.
Author Bio
Sir, in the example given (gross income Rs 7,50,000, donation Rs 1,00,000), my understanding is that the deduction allowed would be: lower of (a) 50% of the donated amount, and (b) 10% of the (adjusted) gross income – i.e. lower of Rs 50,000 and Rs 75,000, which would be Rs 50,000/-, not Rs 37,500 as stated. I request you to clarify.
Please also provide some more details on calculation of ‘adjusted gross income’ for purposes of this section.
Thank you.