Recently, my parents went on a trip to Lord Venkateshwara Temple, Tirupati. My father had been saving for a while and wanted to donate some money on this visit. However, due to Covid restrictions, all physical donations were stopped. Any donation was supposed to be made online. So, he called me up to check and I found out that this was a blessing in disguise. All the donations made to SRIVANI (Sri Venkateswara Alaya Nirmana) are eligible for deduction Under Section 80G of income tax act 1961.
So what? I decided to explore more on the topic to understand how this section works. After all, if good karma is fused with a money making opportunity somehow, it is indeed a rare combination. Do you also set aside some money for your philanthropy endeavors? If yes, then just by making some wise choices on where to put that money, you may stand a chance to avoid tax absolutely legally. Let’s explore the section 80G in detail.
What is Section 80G?
Section 80G under the income tax act 1961 allows tax deductions on donation to designated charitable institutions. All tax payers are eligible to claim this deduction.
So you might be wondering that why are you being rewarded for donation? Undoubtedly, helping the society and uplifting the downtrodden is a noble cause. And this time, for a change, Government recognizes these efforts and tries to promote this behavior through income tax deductions. However, in order to bring some structure to it, you just can’t go about and donate anywhere and later claim it. As you read further, you’d find more on where, how you can donate.
Mode of Payment:
In another attempt to curb the malpractices around this, starting FY 2017, all donations exceeding Rs. 2000, made in cash will not be considered for this deduction. This means that if you donate Rs. 10,000 in cash, you will be able to claim Rs. 2,000 only for the deduction.
In kind contributions such as food, clothes, medicines don’t qualify for the deduction either.
Henceforth, the only modes available for you to claim this deduction is to pay using non cash methods like online payments, cheque, credit card, debit card.
How to Claim Deduction?
In order to claim deduction under this section, following details are required:
- Name of the Donee (The institute/trust receiving the donation)
- PAN of the Donee
- Amount of Donation
As a documented proof, you should have a stamped receipt of the donation you have made. This receipt should mandatorily include Name, PAN, Address of the Donee. Apart from that, your name and amount of the donation is a must.
Receipt must also include the registration number of the trust under section 80G and the validity of the registration.
In case you are eligible for a 100% deduction (more on this in coming sections), you would also need a form 58. Form 58 should be given to you by the trust to which you are donating the money. This would include the cost of the project, amount authorized by the project and actual amount collected.
There are multiple categories which would decide the maximum limit of deduction from your donation. There are some donations that may qualify for the 100% of the donation amount or 50% of the same. They do not have any upper limit attached to them. However, some donations may be capped at 10% of your adjusted gross total income. The adjusted gross total income is calculated as follows:
Adjusted Gross Income Total Income = Total Gross Income (-) All Exempted Income (which includes your HRA, LTA etc. ) (-) Long term capital gains (-) All deductions u/s 80C to 80U (except 80G)
The chart above makes it pretty evident; how to calculate the maximum deductible limit basis the category your donation falls in.
In case you have donated to an institution that is falling under this category, you are eligible for a 100% deduction without any upper limit. That means even if your gross adjusted total income is Rs. 15L an year and you have decided to donate it all, you can claim the tax benefits as applicable on Rs. 15L. Institutions under this category are mentioned below:
Tap for the names of the Institutions that fall under this category:
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a State Government for the medical relief to the poor
- National Illness Assistance Fund
- National Blood Transfusion Council or to any State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children’s Fund
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
- The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6, 1993
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
- Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made during January 26, 2001, and September 30, 2001) or
- Prime Minister’s Armenia Earthquake Relief Fund
- Africa (Public Contributions – India) Fund
- Swachh Bharat Kosh (applicable from FY 2014-15)
- Clean Ganga Fund (applicable from FY 2014-15)
- National Fund for Control of Drug Abuse (applicable from FY 2015-16)
These are the funds which do not have any upper limit but the deduction is limited to the 50% of your donation amount. The institutions falling under this category are:
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
Taking the previous example here, in case you donate Rs. 15L, you would be eligible for a deduction of Rs. 7.5L only.
Donations under this category are subject to a 100% deduction up to 10% of your gross adjusted income. Maintaining the uniformity of the illustration, if you decide to donate any amount to such an institution, you’d be allowed to deduct the tax up to Rs. 1.5L (10% of 15L) only. Institutions falling under this category are as follows:
- Donations to the government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning
- Donation by a Company to the Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India, or the sponsorship of sports and games in India.
No rewards for guessing, these institutions allow a deduction of 50% up to 10 % of your gross adjusted income. A quick trivia. If I donate Rs. 10L in a category D institution and my adjusted gross annual income is Rs. 8L, how much refund do I get? Let me know in the comments section below.
Tap for options falling under this category:
- Any other fund or any institution which satisfies the conditions mentioned in Section 80G(5)
- Government or any local authority, to be utilized for any charitable purpose other than the purpose of promoting family planning
- Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both
- Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community
- For repairs or renovation of any notified temple, mosque, gurudwara, church or other places.
This is a great option given to the tax paying individuals. In case you keep aside a sum to donate for a bigger cause, this is a great avenue to keep in mind. This is over and above the deductions made in 80C. It is the best of both worlds indeed. However, one needs to ensure that if the sole purpose of donation is tax saving, a due diligence is conducted before giving it away. Make sure that you check if the institute or trust is a part of section 80G using it’s registration number. Also, the registration should be valid at the time of donation. Financial blunders are super common. On that note, did you read mine from here?
I am personally not into donations as of now. May be as the time passes, I see myself giving it a thought. What about you? Did you know about this provision?
Got questions? Want to take it to the next level? Reach out to me using your preferred platform from the links below
Until next time..