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Understanding Section 80G of the Income Tax Act: Get Tax Benefits for your Donations

Section 80G of the Income Tax Act 1961 is an important section as it allows individuals and organizations to claim a deduction or rebate on the donation which they make to certain specified fund or trusts registered under section 80G. This means that if the donation is approved by the assessing officer and fulfils the requirements of the Act, then the donor would be allowed a deduction and the amount of deduction will depend on the amount donated and the rate of deduction. The present article will provide an in-depth analysis of section 80G registration of Income Tax Act 1961 and the essential requirements for obtaining a deduction under this section.

Objective of Section 80G of the Income Tax Act

The purpose of section 80G registration of the Income Tax Act 1961 is to direct the minds of tax-payers from looking for tax avoidance arrangements to making legitimate and timely contribution to charities and trusts which actively qualify for a reduction in taxable income.

Analysis of Section 80G of the Income Tax Act

Section 80G registration of Income Tax Act 1961 allows a reduction – either in the form of deduction or rebate- to those individuals who make donation to listed funds and trusts. The amount of deduction allowed is equal to the amount donated, subject to norms defined under the section.

The benefits of this deduction can be availed provided the donor is in compliance with the norms of the section. Some of the essential requirements that need to be fulfilled in order to qualify for a deduction under this section are as follows:

1) The donation must be made to a ‘qualified trust or fund’ as defined under this section. This can include a trust or fund established by the Central Government or any State Government or the local authority or any other body approved by the Central Government in this behalf, for charitable or religious purposes.

2) The person making the donation must possess a valid and correct Permanent Account Number (PAN), generated from the Income Tax Department.

3) The donation must be made either in cash or by cheque or crossed demand draft. Cash donation can’t be more than Rs. 2000.

4) To claim a deduction for a donation made to a trust or fund, the trust or fund must have a registration certificate granted by the Central Government, under Section 80G. The trust or fund should have applied for the certificate within a time frame mentioned in the section and the certificate should be valid at the time of making the donation.

5) The trust or fund should also provide the donors with an authorization certificate. This certificate allows the donors to include the amount of donation made to the specified trust or fund in their returns.

Limitations on deduction under Section 80G of the Income Tax Act

When it comes to section 80G, there are certain limitations which needs to be taken into consideration. While claiming deductions under this section, the donor needs to consider the following:

1) There is a capping on the amount which can be claimed as deduction. The amount of deduction allowed is equal to the amount donated, however, it cannot exceed 10% of the adjusted gross total income as mentioned in the return submitted by the taxpayer.

2) Deduction under section 80G is not applicable to donation made to religious and charitable organization outside India.

3) If the person making the donation does not have a correct PAN, he/she will not be allowed to claim this deduction.

Conclusion

Section 80G of the Income Tax Act 1961 provides taxpayers with an opportunity to claim a deduction on the donations made to specified funds and trusts. To avail the benefits of this deduction, donors must comply with the norms prescribed under this section.

The benefits of this deduction can be realized provided the donor is in compliance with the requirements of the section. However, it is important to remember the certain limitation of this section, to ensure that individuals are in a position to maximize the deductions allowed under the relevant provisions.

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