How Can Individuals Claim Deductions for Donations Under Section 80G?

Section 80G of the Income Tax Act provides tax deductions to individuals and organizations who make donations to eligible charitable institutions or funds. This section aims to encourage taxpayers to contribute towards charitable causes and offer financial support to organizations that work for social welfare.

Key Features of Section 80G:

Eligible Donations:

Donations made to approved charitable organizations, NGOs, or funds recognized by the government are eligible for deductions under Section 80G.

Donations can be made to institutions that work for poverty alleviation, education, health, environmental conservation, or support for vulnerable communities.

Donations to certain political parties or scientific research funds are also eligible for deductions under specific conditions.

Types of Eligible Donations:

• Cash Donations: These include donations made in cash, cheque, or draft.
• Donations in Kind: Donations in the form of goods, property, or assets are also eligible, but specific valuation and conditions apply.
• Sponsorship of Projects: Donations to fund specific charitable projects can qualify for deductions under Section 80G.

Tax Benefits:

The tax deduction for donations can be claimed either as 100% or 50% of the donated amount, depending on the nature of the organization.

Some donations are eligible for 100% deduction, while others qualify for only a 50% deduction. Certain donations may also be subject to limits (e.g., only up to a certain percentage of the taxpayer’s income).

Documents Required for Claiming Deductions:

• To claim the deduction, the taxpayer must obtain a receipt or acknowledgment from the charitable institution. The receipt must include details such as the name of the institution, amount of donation, date, and the 80G certificate number.
• Donations of ₹2,000 or more must be made by cheque or bank transfer for the deduction to be valid.
• The institution must also provide a valid 80G certificate (validity of which needs to be checked).

Conditions for Donations:

• Donations to certain funds or organizations that are not registered under Section 80G will not qualify for deductions.
• Some donations may not be eligible if the recipient organization is not listed as an approved entity by the Income Tax Department.

Deduction Limits:

100% Deduction (Without Limitation):

Donations made to certain government-approved funds, like the Prime Minister's National Relief Fund (PMNRF) or the National Defence Fund, are eligible for 100% deduction without any limit.

Donations to charitable institutions such as those working for the welfare of the underprivileged, education, or medical relief are also eligible for 100% deduction in certain cases.

50% Deduction (With Limitation):

Donations to certain charitable organizations are eligible for 50% deduction.

However, some donations are subject to a cap, where only a certain percentage of the donor’s income qualifies for the deduction (e.g., up to 10% of total income).

Example:

Let’s assume that Mr. Kumar donates the following amounts:

• Donation to PMNRF: ₹50,000 (eligible for 100% deduction).
• Donation to an NGO for Education: ₹30,000 (eligible for 50% deduction).

In this case:

• 100% Deduction: Mr. Kumar can claim a ₹50,000 deduction for the donation to the PMNRF.
• 50% Deduction: He can claim ₹15,000 (50% of ₹30,000) for the donation to the NGO for Education.

Thus, Mr. Kumar’s total eligible deduction under Section 80G would be ₹65,000.

Conclusion:

Section 80G offers a tax benefit to individuals who contribute to eligible charitable organizations. By making donations to government-approved funds or NGOs, individuals can reduce their taxable income, either by claiming 100% or 50% of the donation amount as a deduction. The key requirements are obtaining valid receipts, ensuring donations are made to approved institutions, and complying with donation limits.