80G of Income Tax Act
There are many philanthropic trusts in India that work for the benefit of society. These charitable institutions are set to serve people in need. Each year many individuals provide beneficent contributions to such organizations. Donating for the welfare of society is commendable. The government of India also appreciates such donations and offers full support by allowing tax deductions to charity.
As per 80 G of the Income Tax Act, an individual who contributes a donation to a charitable organization can enjoy tax deductions on such contributions. This contribution does not only help in the reduction of tax liability but also motivates an individual to do good for society.
There are certain norms for enjoying exemptions in tax payment with the 80 G section that are important to understand. Not all donations can be claimed for tax reduction and before one could actually understand how one can enjoy this deduction with the 80 G section, it is important to understand what income tax is and how one could enjoy exemptions on it.
Understanding Income tax and the exemptions
Income tax is a type of tax that is imposed on an individual’s income. This may include any sort of income including the total salary of an individual, profit earned through business, capital gains, income earned through the property, etc.
The income tax is calculated on the total income earned by an individual but one can enjoy certain exemptions on this. There are certain subsections in the Income-tax act that entails various criteria for obtaining a tax exemption. With this exemption, an individual can reduce the total income on which the tax liability will be calculated.
Section 80G of Income Tax Act
There are many ways one could enjoy exemption on tax liability. By buying health insurance, life insurance, and investing in other instruments, one can enjoy certain relaxation on tax payment but other than this donation to charitable organizations can also help claim tax exemptions. All this is covered under 80G of the Income Tax Act.
Section 80 G is an important section of the Income-tax act that lets an individual enjoy tax deductions by donating to a charitable trust. According to this section, an individual can reduce his tax liability in a current financial year by providing a contribution to a charitable institution.
The recent Budget 2020 declared on 1st February 2020, proposed changes in this section and asked all existing trust and charitable organizations to re-apply to validate their registration.
Mode of payment
Under the 80G section, an individual can claim for tax deduction only if the charitable contribution is done by cash, draft, or cheque. However, there are certain norms for the mode of payment, which you must keep in mind:
- An individual can claim a deduction of only INR 2000 if the donation is done in cash.
- There is no limit of deduction if the donation is done by cheque or digital payment mode.
- One cannot enjoy any deduction, if the donation is made in kind such as clothes, food, etc.
Who can avail of this exemption?
There are certain eligibility criteria for obtaining tax deductions under 80G Of Income Tax Act, these are:
- Any individual or a member of HUFs can claim deductions against their charitable contribution.
- An NRI can apply for deductions if he is contributing to any applicable trust.
- A taxpayer can claim for deductions only if he submits relevant proof of the charitable contribution.
- An individual can claim deductions only if he contributes with his taxable income. Donations made with non-taxable income cannot be considered for any deductions.
How can I claim deductions under 80G?
So as to enjoy tax deductions under 80G, it is important to provide payment proof while claiming for the deduction. The proof is usually in the form of a receipt that has all the information about the charitable trust that has received the donation, this includes:
- Name of the donor
- The amount donated to the organization
- Name of the benefactor of the donation
- Address of the benefactor of the donation
- PAN of the benefactor of the donation
- Registration number of charity
What documents are required?
While claiming for deductions under 80G Of Income Tax Act, the following documents are to be submitted:
- The stamped receipt that has been authenticated with a stamp from the benefactor organization
- Form 58 can help claim a 100% tax deduction on the donation.
Donations that are eligible for a deduction of 100%
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- Fund set up by a State Government for the medical relief to the poor
- National Sports Fund
- National Cultural Fund
- National Illness Assistance Fund
- National Children’s Fund
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Swachh Bharat Kosh (applicable from FY 2014-15)
- National Defence Fund set up by the Central Government
Donations that are eligible for a deduction of 50%
- Indira Gandhi Memorial Trust
- Prime Minister’s Drought Relief Fund
- Jawaharlal Nehru Memorial Fund
- Rajiv Gandhi Foundation
While claiming deductions for a contribution or donation to a charitable organization, people often get confused between section 80G and section 80GGA. While both allow deductions of donation, 80 G allows deduction on a donation made to a charitable organization and 80 GGA allows deduction on a donation made to scientific research and rural development.
Things to keep in mind when filing for 80G
There are certain details that one need to provide while filling for 80 G and this includes the following:
- Always have proof of receipt before claiming deduction in 80G
- Always apply with the right documents
- Check for the list of charitable trusts included under the section
As per the budget of 2020, the criteria of exemptions and deductions were eliminated to make the tax repayment process simpler, however, the recent budget allows individuals to repay tax based on the old slabs that let you enjoy these exemptions on your tax liability. As per section 80G of the income tax act, an individual can claim exemptions on his tax liability by donating to a charitable institution. There are certain norms in the section that helps decide whether the deduction can be either 100% or 50%. This depends on the amount of donation and the mode of the donation made to the institution.
The 80G Of Income Tax Act provides an effective way to enjoy a tax deduction by contributing donations to charitable organizations or institutions. 80G helps promote the activities of charity in the country.