Tax Benefit Against Donations Under Section 80G

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New Delhi: As we near the last quarter of 2020/21, here’s a look at how best to review your tax savings and take steps, if needed, to add that extra bit of money in your pocket. 

Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. All donations, however, are not eligible for deductions under section 80G. Only donations made to prescribed funds qualify as a deduction. This deduction can be claimed by any taxpayer – individuals, company, firm or any other person.

The amount of donation that can be claimed as a deduction:

  1. 100% deduction without restriction – This category of deduction provides a maximum tax benefit to the taxpayer. The taxpayer can claim a deduction for the full amount of the donation. Donations to National Defence Fund, the Prime Minister’s National Relief Fund, and the National Children’s Fund fall in this category.
     
  2. 50% deduction without restriction – Some donations are eligible for deduction to the extent of 50% of the amount donated. Donations to Prime Minister’s Drought Relief Fund comes in this category. Thus, a deduction can be claimed for 50% of the donation amount without any restriction on the upper limit.
     
  3. 100% deduction with restriction – Any donation made to the government or any approved local authority, institution, or association for the purpose of promoting family planning is eligible for 100% deduction subject to a ceiling of 10% of adjusted GTI of the taxpayer. Contributions made to the Indian Olympic Association or any other approved sports association or institution are also eligible for deduction under this category. However, this benefit is only available to companies.
     
  4. 50% deduction with restriction – Donations made to the government or any approved local authority for any charitable purpose (other than promotion of family planning), renovation or repair of any notified place of worship, etc, are eligible for 50% deduction subject to a ceiling of 10% of adjusted GTI of the taxpayer.

Mode of payment

This deduction can only be claimed when the contribution has been made via a cheque or a draft or in cash. But the deduction is not allowed for donations made in cash exceeding Rs 10,000. In-kind contributions such as food, material, clothes, medicines, etc. do not qualify for deduction under section 80G. From Financial Year 2017-18 onwards: Any donations made in cash exceeding Rs 2,000 will not be allowed as a deduction. The donations above Rs 2,000 should be made in any mode other than cash to qualify as a deduction under section 80G.

Donations made towards Covid relief

If you are someone who has donated towards a dedicated national fund with the primary objective of dealing with any kind of emergency or distress situation, like the covid-19 pandemic, a public charitable trust under the name of Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) has been set up. Donations to PM CARES Fund would qualify for a 100% deduction. Further, such donation would also qualify as CSR expenditure for the Companies Act, 2013.

Documents required to claim benefit

To avail, the deduction one must provide the standard receipt issued by the trust/donee entity as proof of the donation made. While taking the receipt, one must make sure that the receipt contains the name, address, Pan Number of the trust, the registration number of the trust, name of the donor, and amount donated, written in words and figures. These details will be required at the time of filing ITR to claim a deduction.

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