Section 80G of Income tax act,1961

What is Section 80G?

Section 80G of the Income Tax Act provides deductions for donations made to certain charitable institutions and funds. 

The amount of deduction varies depending on the type of donation and the recipient organization, and it's subject to certain limits and conditions outlined in the law.

Who are eligible for deduction u/s 80G?

The following taxpayer are eligible for deduction under section 80G :

• Individuals
• Companies
• Firms
• Hindu Undivided Firm (HUF)
• Non-Resident Indian (NRI)
• Any other person

Who are ineligible for deduction u/s 80G?

Individuals who opt for the new regime, this deduction is not eligible.

What are the acceptable modes of payment for donations to qualify for deductions under Section 80G?

Under Section 80G, taxpayers can claim deductions for donations made through various modes such as :

• cheque, 
• demand draft, and 
• cash (for donations below Rs 2,000). However, if contributions and donations made in cash and those are above Rs 2,000 will not qualify for deduction under Section 80G. Donations exceeding Rs 2,000 should be made through modes other than cash to be eligible for deduction under Section 80G.

Section 80G Deduction Eligible Computation

According to this section if the donation made to APPROVED FUNDS/CHARITABLE INSTITUTIONS   deduction shall be eligible.

For the purpose of this section to get deduction/exemption eligibility, donations are classified as four categories as below.

1) 100% deduction, with no ceiling limit/restriction on amount of donation

Under this category some donations are notified schemes and if assesses donated to such notified schemes then, there is no limit to donate amount, means assesses can donate any quantum of amount with no limit and shall get whole donated amount as deduction u/s 80G(Please refer Section 80G of Income tax act 1961 to know about notified schemes)

For understanding example, if the assesses donated Rs.10000/Rs.100000 what may be then the assesses shall get deduction of Rs.10000/Rs.100000 u/s 80G from his gross total income.

2) 50% deduction, with no ceiling limit/restriction on amount of donation

Under this category some donation are notified schemes and if assesses donated to such notified schemes then, there is no limit to donate amount and assesses shall get only 50% of their total donation amount as deduction u/s 80G, means assesses can donate any quantum of amount with no limit but shall get only 50% of donation amount as deduction u/s 80G (Please refer Section 80G of Income tax act 1961 to know about notified schemes)

For understanding example, if the assesses donated Rs.10000/Rs.100000 what may be then the assesses shall get deduction of Rs.5000/Rs.50000 u/s 80G from his gross total income.

3) 100% deduction, with ceiling limit/qualifying amount  = 10% of Adjusted Gross total income

Under this category some donations are notified schemes and if assesses donated to such notified schemes then, the assesses are restricted to donate upto sum quantum of amount(maximum ceiling limit to donate amount), even if assess donated more amount then maximum ceiling limit then only considered maximum  ceiling limit is as donated amount and assesses shall eligible to deduction u/s 80G of 100% of donation paid amount subject to maximum limit prescribed. (Please refer Section 80G of Income tax act 1961 to know about notified schemes)

For understanding Example 1: If the qualifying amount is Rs.5000 and assesses donated Rs.3000 then Rs.3000 shall be eligible for deduction u/s 80G from their Gross total Income.

Example 2: If the qualifying amount is Rs.5000 and assesses donated Rs.6000 then only Rs.5000 shall be eligible for deduction u/s 80G from their Gross total Income  

4) 50% deduction, with ceiling limit/qualifying amount  = 10% of Adjusted Gross total income

Under this category some donations are notified schemes and if assesses donated to such notified schemes then, the assesses are restricted to donate upto sum quantum of amount (maximum ceiling limit to donate amount), even if assess donated more amount then maximum ceiling limit then only considered maximum ceiling limit is as donated amount and assesses shall eligible to deduction u/s 80G of 50% of donation paid amount subject to maximum limit prescribed. (Please refer Section 80G of Income tax act 1961 to know about notified schemes)

For understanding Example 1: If the qualifying amount is Rs.5000 and assesses donated Rs.3000 then Rs.1500 shall be eligible for deduction u/s 80G from their Gross total Income.

Example 2: If the qualifying amount is Rs.5000 and assesses donated Rs.6000 then only Rs.5000 shall be considered as donation amount and Rs.2500 eligible for deduction u/s 80G from their Gross total Income

For the purpose of above point no 3 and 4 Qualifying amount = Gross total income – all deductions except deduction u/s 80G(Means qualifying amount is the total income before deduction u/s 80G but after deduction of all other deductions).

What is Adjusted Gross Total Income?

Adjusted Gross Total Income is the total income that is earned from all sources, adjusted for certain deductions and exemptions, specifically for the purpose of calculating tax exemptions under Section 80G.

For example: Let's say total income from various sources is Rs. 9,00,000. From this, you need to deduct:

• Amount deductible under sections 80C to 80U, excluding Section 80G: Rs. 1,50,000
• Income exempt from tax: Rs. 50,000
• Long-term capital gains: Rs. 20,000
• Short-term capital gains under Section 111A: Rs. 10,000
• Income specified in Sections 115A, 115AB, 115AC, or 115AD: Rs. 5,000

This Adjusted Gross Total Income is required to be used for calculating tax exemptions under Section 80G.

Important And Notable And Should Be Remember Points

While the assessee making donation and claiming of deduction u/s80G the following points shall be consider

1) The donation made to the institute or trust or any other which has valid 80G registration and the time of making donation shall only eligible to claim deduction u/s 80G.(for ex: donation made to a small temple in a rural village which not recognized u/s 80G is not eligible for deduction)

2) Donation should be made in sum of money and not in Kind[Rama Verma 187 ITR 308(SC)](for ex: cloths donated to a institute not eligible for deduction)

3) The assessee should have proof of payment of donation and has to produce when ever it is demanded by Assessing Officer.(ex: donation receipt which contains the 80G registration details of the institute)

4) No deduction shall be allowed in respect of donation of any sum exceeding Rs.10,000,unless such sum is paid by any mode other than cash(for ex: donation of Rs.50000 is paid in cash not eligible for deduction but if it is paid through cheque then eligible for deduction)

Important Note To The Employer

While computation of TDS deduction liability of the employee an employer shall not be consider the benefit of u/s80G deduction.

Means all the assesses should be get benefit of deduction u/s 80G through filing of return of income u/s 139 only and can get refund of TDS amount excess deducted by the employer or any advance taxes paid excess.

Donations notified under category 1:

1) National Defence Fund

2) Prime Minister’s National Relief Fund

3) Prime Minister’s Armenia Earthquake Relief Fund

4) Africa(Public Contributions) India Fund

5) National Childern’s Fund

6) National Foundation for Communal Harmony

7) Approved Universities/Educational Institutions of National Eminence

8) Maharashtra Chief Minister’s Earthquake Relief Fund

9) Zila Saksharta Samithi of any district

10) National/State Blood Transfusion Council

11) Any Fund set up by a State Gove.for providing medical relief to the poor

12) Army Central Welfare Fund, Air Force Central Fund or Indian Naval Benevolent Fund              

13) Andhra Pradesh Chief Minister’s Cyclone Relief Fund

14) National Illness Assistance Fund

15) Chief Minister’s/Lieutenant Governor’s Relief fund for any State/Union Territory

16) National Sports Fund

17) National Cultural Fund

18) Fund for Technology & Application set up by Central Government

19) National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities

20) Gujarat Earthquake Relief Fund

Donations notified under category 2:

1) Jawaharlal Nehru Memorial Fund

2) Prime Minister’s Drought Relief Fund

3) Indira Gandhi Memorial Trust

4) Rajiv Gandhi Foundation

Donations notified under category 3:

1) Donation for promoting family planning, paid to –a) government, or b) Any approved Local Authority/Association/Institution

2) Amount paid by a company to the Indian Olympic Association of Notified Institution, for the development of infrastructure or sponsorship for sports and games in India.

Donations notified under Category 4:

1) Approved Institutions or Fund satisfying prescribed conditions. ( if any Institution incurs expenditure of Religious Nature not exceeding 5% of its Total Income, it is still considered to be for charitable purpose only)

2) Donations for charitable purposes other than promoting family planning, paid to Government or any Local Authority

3) An Authority constituted in India or under any other law enacted – a) for dealing with and satisfying the need for housing accommodation, or b) planning, development or improvement of cities, towns and villages, or c) for both

4) Any Authority or Corporation for the benefit of Minority Community[as per Sec.10(26BB)]

5) Any notified Temple, Gurdwara, Mosque, Church or other notified place, for renovation/ repair etc… means any other institute/trust or any other which is not cover under any of the above 3 categories and got registration u/s 80G of the Income tax act,1961.