Section 80G of the income tax Act- a complete guide

An overview of Section 80G of the Income Tax Act

In this post, We’ll talk about Section 80G of the Income Tax Act. The definition, eligibility, documents needed, and tax computation under 80G. Let’s dive into each section in detail: 

Section 80G

As per Section 80G of the Income Tax Act, 1961, charitable donations or contributions made within a given financial year are eligible for a tax deduction when you file your income tax return (ITR). 

Therefore, you will fall into a lower tax bracket, thereby reducing your tax liability. A unique feature of Section 80G is that when you file an ITR for a specific number of charities, there is no maximum amount of your tax-deductible donation.

Eligibility for section 80G

In addition to the percentages of exemption, there are many causes that are not exempt. Before filing taxes, a taxpayer can check whether their charity activity is exempt under section 80G. 

Individuals, Hindu Undivided Families, and businesses are all able to claim gifts under Section 80G. But still, it follows some government-mandated rules.

The 80G tax benefit is also available to NRIs who have contributed to a registered or trusted institution.

Deduction under Section 80G

Tax benefits for gifts given to qualified trusts and charities are subject to a few restrictions. Below are four broad categories of donations under Section 80G.

1. Donations with 100% deduction (Without qualifying limit)

Donations that fall under this category are eligible for a 100% tax deduction and are not restricted by any qualification requirements.These deductions are available for donations to the National Defense Fund, Prime Minister’s National Relief Fund, National Foundation for Communal Harmony, National/State Blood Transfusion Council, etc.

2. Donations with 50% Deduction (Without qualifying limit)

Contributions to trusts like the Prime Minister’s Drought Relief Fund, the National Children’s Fund, and the Indira Gandhi Memorial Fund are eligible for a 50% tax deduction.

3. Donations with 100% deduction (Subjected to 10% of adjusted gross total income)

This category allows for deductions for donations given to the Indian Olympic Association and local governments that support family planning. In such cases, deductions are limited to 10% of the donor’s Adjusted Gross Total Income. Donations that exceed this amount are rounded up to 10%.

4. Donations with 50% deduction (Subjected to 10% of adjusted gross total income):

In this category, you can deduct donations you make to any local authority or government that will use them for any charitable purpose.In such circumstances, deductions are limited to 10% of the donor’s Adjusted Gross Total Income. Donations in excess of this amount are limited to 10%.

Proof Of payment

An Assessee/donor who claims the deduction under Section 80G has to present proof of payment. The assessee should submit the receipt issued by the recipient Institute to get the benefit of the deduction. The donor should produce a proof of payment and in return, the recipient trust will produce a stamped receipt for the donor

Documents Required to claim Deduction under Section-80G

Those who wish to claim a deduction under Section 80G must provide the following documents.

1. Duly Stamped Receipt:

The trust or charity that receives a gift must give a receipt.The receipt should include the name, address, and PAN number of the trust, the amount donated, and the name of the donor.

2. Form 58:

Those who wish to claim a 100% deduction on their donation must submit Form 58, without which their donation won’t be eligible for deduction.

3. Registration Number of Trust:

The Income Tax Department provides each eligible trust with a registration number. Donors should ensure their receipt contains this number. If the registration number is not valid at the time of a particular donation, the deduction might not be eligible.

And with that, we end this post on the Section 80G of the income tax Act. If you have any questions, drop them in the comment section below.