Have you donated money for charity, social or philanthropic purposes, or, have made contributions towards a National Relief Fund? If yes, then you could use these donations to reduce your tax outgo. The Income Tax Act encourages charitable deeds towards the poor and needy, and offers donors tax benefits under Section 80G. Read on to find out more about this section.
Understanding Section 80G
Section 80G offers a tax deduction for donations to certain prescribed funds and charitable institutions. Here are the details of the section.
This section is applicable to all assessees, who make an eligible donation, whether an individual, HUF, NRI or a company.
The extent of deduction is either 50% or 100% of the contribution, depending on the charitable institution donated to.
For certain funds, the aggregate deduction is limited to 10% of the “Adjusted Gross Total Income”. So, in such cases, even if you do make a donation larger than 10% of your Adjusted Gross Total Income, the donation amount eligible for claiming a deduction would be capped at 10% of the Adjusted Gross Total Income.Online GST Certification Course by TaxGuru & MSME- Click here to Join
The Adjusted Gross Total in this case, is the gross total income minus long-term capital gain, short term capital gain and all deductions u/s 80CCC to 80U except any deduction under this section.
Scope of Deduction
Donations with 100% deduction without any qualifying limit:
Donations with 50% deduction without any qualifying limit.
Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
The Donation Receipt
In order to claim deduction, it is mandatory for the donor to furnish a proof of payment towards the eligible fund or institution. A stamped receipt is issued by the recipient trust in this regard, which must be attached by the assessee along with the income tax returns.
The receipt must include the following details.
Tax benefits cannot be claimed without the above mentioned details and document.
Donations deducted from Salary
Where employees have contributed towards eligible charitable causes from their salaries and the donation receipt is on the employer’s name, a deduction under section 80G could still be claimed. In such cases, the employer would need to issue a certificate mentioning that the contribution was made from the employee’s salary account.
There are many trusts in India engaged in charitable activities. In order to ensure that only contributions to genuine trusts entail a tax benefit, the government has brought in registration of trusts. Thus, before you donate, check to see, if the trust you are donating to is registered and has the tax exemption certificate, which is popularly known as the 80G certificate.
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