24/11/2013

Section 80G

Summary Section 80G, 80G of Income Tax, Deduction under section 80G, deduction in respect of donations to certain funds, charitable institution etc

Section 80G of the Indian Income Tax


All the Salaried employees among us would be busy submitting investment declarations or proposed investments to their respective employers to avail tax exemptions. One of the less commonly used sections of our Income Tax is "Section 80G". Not many of us know about this Section and most importantly most of us don't even use it. The purpose of this article is to throw some light on this section.

Section 80G


Section 80G of the Indian Income Tax Act of 1961 provides tax relief to the Citizens of India on the amounts donated as contributions to Approved Charitable Organizations. This means that, money that we donate to charitable organizations can be used to avail income tax exemption.

Who can Utilize Section 80G?

Any person, who earns an Income in India and files his Tax Returns in India is eligible to utilize this Section 80G.

Contributions that cannot be used for Section 80G:

Contributions to Political Parties in India or to any Charitable Organizations abroad are not eligible for Section 80G exemptions. Only donations made to prescribed organizations and institutions qualify for deduction.

Also, donation in Cash only is eligible for tax benefits. Any donations you do in kind like clothes, food etc is not eligible for deduction. So, if you visited an Orphanage and took up the food cost of all the residents for a week by spending Rs. 50,000/- this noble deed of yours will not get you any tax exemptions.

"All donations are not eligible for tax benefits. Tax benefits can be claimed only on specific donations i.e. those made to approved institutions and that too only when done by Cash or Cheque."

Documents Required Availing the Exemption:

A signed & stamped receipt issued by the Charitable Institution is Mandatory to avail exemption under this Section. The most important requirement is the Registration number issued by the Income Tax Department under Section 80G. This number must be printed on the receipt. Without this the receipt is "Not Valid"

The Receipt must have your name in exactly the same format/spelling as in your PAN Card. Also, the amount donated must be written in both numbers and words. 

Maximum Allowed Deduction under Section 80G:

Though donations to charitable institutions are a noble cause, there is an upper limit on how much amount we donate can be used for tax exemptions. The general rule is
"50% of the amount donated subject to a maximum of 10% of the Total Taxable Income of the Individual can be donated and exempted under Section 80G of the Indian Income Tax act of 1961".

A point to note is that, any donations done beyond the allowed limit is not considered for tax purposes. 

However, there are some donations, where this limit of 50% of the donation does not apply. So, such donations can be exempt from your Tax Liability to the full amount (Subject to the 10% upper limit however) 

For ex: If you donated Rs. 1.5 lakhs to the Prime Minister’s Relief Fund, 100% of your donation is eligible for tax exemption with an upper limit of 10% of your total salary. So, if your net taxable salary is 10 lakhs per year, 1 lakh of your donation will be considered for tax purposes and your total taxable salary will come down to 9 lakhs. But, the additional Rs. 50,000/- will not be considered for your tax calculation. 

If you had done the same Rs. 1.5 lakhs donation to a registered NGO in your locality, then only 50% of the amount which is Rs. 75,000/- is exempt from tax. So, your total taxable salary will become Rs. 9.25 lakhs. 

Donations that Qualify for Full Exemption

Donations done to Government Trusts/Funds like "The Prime Ministers National Relief Fund" or "The National Defense Fund" or "The Gujarat Chief Ministers Earthquake Relief Fund" etc qualify for this full 100% exemption. The list is very long and almost all of the Government Owned/Run Charitable Foundations feature in this list.

Private Charitable Institutions do not come under this category. The limit of 50% as explained in the previous paragraph is applicable for donations done to private charities.

Final Summary:

To Wrap Up, Donating to Charity is a Noble Deed and if that donation provides us with tax exemptions, then its even better. So, if you are one of those noble tax payers, who take pride in donating to Charitable Institutions, do it with your Head Held High and don’t forget to Avail your Tax Exemption...


Details in short:
(Conditions)
(1)     The qualifying amount of aggregate donations under sub-items (q) & (t) of item (2)(B) and items (3) to (5) given hereafter should not exceed 10% of the gross total income as reduced by deduction permissible under other provisions of Chapter VI-A (Section 80G(4))::
(2)     The monetary ceiling stated in (1) above does not apply in cases where donations are made:-
Part 1
(a)  to the national defence fund (Section 80G(2)(a)(i)
(b)  to the Jawahar Lal Nehru Memorial Fund (Sec 80G(2)(a)(ii)
(c)  to the Prime Minister drought Relief Fund (Sec 80G(2)(a)(iii)
(d)  to the National Children's Fund (Sec 80G(2)(a)(iiic)
(e)  to the Indira Gandhi Memorial Trust (Sec 80G(2)(a)(iiia)
(f)   to the Rajiv Gandhi Foundation (Sec 80G(2)(a)(iiid)

Part 2
(a)  to the Prime Minister National Relief Fund (Sec 80G(2)(a)(iiia)
(b)  to the Prime Minister Armenia Earthquake Relief Fund (Sec. 80G(2)(a)(iiiaa)
(c)  to the Africa (Public Contribution India) Fund (Sec 80G(2)(a)(iiiab)
(d)  to the National Foundation for Communal Harmony (Sec 80G(2)(a)(iiie)
(e) to a University or any educational institution of national eminence as may be approved by the prescribe authority (Sec 80G(2)(a)(iiif)
(f)   to the Chief Minister Earthquake Relief Fund, Maharashtra (Sec 80G(2)(a)(iiig)
(g)  to any Zila Sakshartha Samiti Constituted in any district under the chairmanship of the Collector of that district for the purposes of improvement of primary education in villages & towns in such district and for literacy and post literacy activities (Sec 80G(2)(a)(iiih)
(h) to the National Blood Transfusion Council or to any State Blood Transfusion Council which has its sole object the control, supervision, regulation or encouragement in India of the services related to operation and requirements of blood banks (Sec 80G(2)(a)(iiiha)
(i)  to any fund set up by a State Government to provide medical relief to the poor (Sec 80G(2)(a)(iiihb)
(j)  to any 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 members of such forces or their dependents (Sec 80G(2)(a)(iiihe)
(k) to the Andhra Pradesh Chief Minister Cyclone Relief Fund, 1996 (Sec 80G(2)(a)(iiihd)
(l)  to the National Illness Assistance Fund (Sec 80G(2)(a)(iiihe)
(m) to the Chief Minister Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Union territory (Sec 80G(2)(a)(iiihf)
(n) to the National Sports Fund to be set up by the Central Government (Sec 80G(2)(a)(iiihg)

The donations must be to those approved institutions or funds established in India for a charitable purpose and fulfilling the conditions prescribed under the Income Tax Act, (Sec 80G(2)(a)(iv);

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 donations made to institutions established in India for a charitable purpose and will qualify for deduction u/s 80G (Explanation 4 to Sec. 80G)

Donation to any corporation referred to in Section 10(26BB) (Sec 80G(2)(a)(via) and only donations in form of money and not in kind will qualify for dedeuction (Explanation 5 to Sec. 80G)

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