What Are the Key Provisions of Section 80G for Donations?

Section 80G of the Income Tax Act in India provides tax deductions for donations made to specified charitable institutions and government-approved funds. It encourages philanthropy and allows taxpayers to reduce their taxable income by contributing to social causes. The provisions under Section 80G offer significant tax relief to individuals, Hindu Undivided Families (HUFs), and businesses that make donations.

Key Provisions of Section 80G for Donations:

Eligibility for Deduction:

Donations made to charitable organizations or funds that are recognized by the Income Tax Department under Section 80G are eligible for tax deductions.

The organization must be registered with the government or be a non-profit entity, such as a charitable trust or a society.

Types of Donations Eligible for Deduction:

• Donations to Registered Charitable Organizations: Donations made to government-approved charitable organizations, NGOs, or other specified funds are eligible.
• Donations to Prime Minister’s National Relief Fund (PMNRF), National Defence Fund (NDF), and other similar funds: Donations to these government funds also qualify for deductions under Section 80G.
• Donations to Certain Religious Organizations: Donations to religious institutions (such as temples, mosques, or churches) may also qualify, subject to certain conditions.

Percentage of Deduction:

• 100% Deduction: Donations to certain specified funds and organizations (e.g., the PMNRF, National Defence Fund) qualify for a 100% deduction of the donated amount, subject to no limit.
• 50% Deduction: Donations made to other specified organizations or charitable trusts (e.g., registered NGOs) may qualify for a 50% deduction, with or without restrictions, depending on the nature of the institution.
• Subject to 10% of Gross Income: In some cases, the deduction is limited to 10% of the donor’s gross income. For example, donations to religious institutions may be subject to such limits.

Documentation Required:

To claim a deduction under Section 80G, the taxpayer must obtain a receipt from the organization, stating the amount donated and the registration number of the organization under Section 80G.

The receipt should also clearly mention whether the donation is eligible for a 100% or 50% deduction.

Cash Donations:

Donations made in cash are eligible for deductions, but there are limits on the amount. If a donation exceeds ₹2,000 in cash, it will not be eligible for a deduction under Section 80G.

For amounts above ₹2,000, donations should be made through a cheque, draft, or digital modes to qualify for tax relief.

Effect on Taxable Income:

The donations that qualify under Section 80G are deducted from the taxpayer's total income, thus reducing their taxable income and the amount of tax payable.

This reduces the overall tax burden on the donor, encouraging contributions to charitable causes.

No Upper Limit for Certain Donations:

There is no upper limit for donations made to government-approved funds such as the PMNRF, National Defence Fund, or the National Children's Fund. Donors can claim 100% deductions on the entire donation amount.

Specific Conditions for Certain Donations:

Some donations, especially to religious organizations, may have conditions attached to them regarding the portion of the donation that is eligible for a deduction. For example, the deduction may apply only to the part of the donation that is used for charitable purposes, not for religious rituals.

Corporate Donations:

Corporates and businesses can also benefit from Section 80G. Companies can deduct donations made to eligible charitable organizations from their profits, thereby reducing their taxable income.

Example:

Suppose an individual donates ₹50,000 to a registered NGO that is eligible under Section 80G. Depending on the NGO's classification, the donor may be eligible for either a 100% or 50% deduction on the donated amount. If the donation qualifies for a 50% deduction, the taxpayer can reduce their taxable income by ₹25,000 (50% of ₹50,000), thereby lowering their tax liability.