Have you ever considered giving back to a cause you care about? Section 80G of the Income Tax Act in India offers a fantastic way to support charitable organizations while reducing your tax liability. However, it also comes with some limitations, which can waste your move towards saving your tax. In this blog, we will equip you with the knowledge to make informed decisions about your charitable giving and maximize the tax benefits available under Section 80G.

What is Section 80G?

Let’s first understand what is Section 80G and who can benefit from this. Section 80G is a government initiative that encourages charitable giving by offering tax deductions to taxpayers who donate to eligible organizations. In essence, it rewards you for supporting worthy causes by allowing you to reduce your taxable income.

Who Can Benefit?

The beauty of Section 80G is that it’s not limited to a specific category of taxpayers. Anyone filing an income tax return in India can potentially benefit from this provision, including:

• Individuals
• Companies
• Firms (including partnership firms)
• Hindu Undivided Families (HUFs)
• Non-Resident Indians (NRIs)
• Any other person as defined by the Income Tax Act

What Can Be Donated?

Not all forms of giving qualify for deductions under Section 80G. Here’s what you can claim:

• Monetary contributions: Donations made through cash (up to Rs. 2,000), cheques, or online transfers are eligible for deductions.
• In-kind donations: Unfortunately, currently, donations of goods or services cannot be claimed as deductions.

Who Can You Donate To?

The key is to donate to organizations registered and approved by the Income Tax Department under Section 80G. This ensures your contribution goes towards a legitimate cause. Examples include:

• Relief Funds: Donations to the Prime Minister’s National Relief Fund (PMNRF) or the National Defence Fund (NDF) qualify for a 100% deduction without any limit.
• Charitable Institutions: Contributions to organizations like Daan Patra working for specific social causes, can be deducted by 50% of the amount donated, subject to a 10% limit of your Adjusted Gross Total Income (AGTI). We’ll discuss AGTI in detail later.

Limitations for Donation Under Section 80G

• 100% Deduction with No Limit: This applies to donations made to specific funds with national importance, like the Prime Minister’s National Relief Fund (PMNRF) or the National Defence Fund (NDF). There’s no cap on the deductible amount, allowing you to claim the entire donation against your taxable income.
• 50% Deduction with No Limit: Donations to certain charitable institutions supporting specific causes fall under this category. Examples include the Jawaharlal Nehru Memorial Fund and the Prime Minister’s Drought Relief Fund. Similar to the previous category, there’s no upper limit on the amount you can donate, but you can deduct only 50% of the donation from your taxes.
• 100% Deduction Capped at 10% of AGTI: Government donations or approved local authorities for promoting family planning qualify for a 100% deduction. However, this deduction is capped at 10% of your Adjusted Gross Total Income (AGTI). We’ll discuss AGTI in detail in the next section.
• 50% Deduction Capped at 10% of AGTI: This is the most common category. Donations to any other approved charitable organization under Section 80G, including Daan Patra, fall under this bracket. Similar to the previous category, you can claim a 50% deduction, but it’s subject to a maximum of 10% of your AGTI.

Understanding Your AGTI

AGTI stands for Adjusted Gross Total Income. This is your total income minus specific exclusions mentioned in the Income Tax Act. For instance, long-term capital gains are excluded from AGTI calculations. Knowing your AGTI helps determine the maximum deduction you can claim for donations under the 10% capped categories.

Documenting Your Donations:

To claim your deduction, proper documentation is essential. Here’s what you need:

• Donation Receipt: Obtain a receipt from the organization you donated to. This receipt should clearly mention:
  • Name and PAN number of the donee organization
  • Your name as the donor
  • Date and amount of the donation.

The formula for calculating the Adjusted Gross Total Income is:

Adjusted Gross Total Income=Gross Total Income−(Exemptions+Deductions)

This Adjusted Gross Total Income is then used to determine the maximum limit for donations under Section 80G that are subject to the 10% restriction. It’s essential for donors to maintain proper documentation and proof of payment to claim these deductions when filing their income tax returns.

 Promoting Transparency:

For better transparency, the Income Tax Department encourages digital payments or cheque transactions for donations. This helps maintain a clear record and reduces the chances of misuse.

Claiming Your Tax Deduction and Recent Updates

Claiming Your Deduction:

Once you understand the category and limit applicable to your donation, claiming the deduction is straightforward:

1. Income Tax Return (ITR): While filing your ITR, locate the relevant sections designated for claiming deductions under Section 80G. Fill out these sections accurately, reflecting the donation amount and the name of the donee organization.
2. Documentation Retention: Always keep the donation receipts along with your tax return documents. These receipts serve as proof in case of any verification by the Income Tax Department.

Recent Amendments and Focus on Transparency:

The Income Tax Department is constantly working to improve transparency and streamline the process. They recently updated a Digital Tracking and Verification System with the aim of increasing the implementation of digital tracking and verification systems to monitor donations. This helps ensure that contributions reach the intended beneficiaries and reduces the chances of misuse.

Examples in Action!

Let’s say you donate Rs. 50,000 to CRY. Since CRY is an approved organization under Section 80G, you can claim a 50% deduction, subject to a maximum of 10% of your AGTI. For example, if your AGTI is Rs. 1,00,000, the maximum deduction you can claim is Rs. 10,000 (10% of your AGTI). In this case, your deduction for the donation to CRY would be Rs. 10,000 (50% of Rs. 20,000, capped at the 10% limit).

 Conclusion

By understanding the categories, limits, documentation requirements, and claiming procedures, you can maximize the tax benefits associated with your charitable contributions. Remember, informed donations not only benefit worthy causes but also allow you to reduce your tax burden. 

If you want to save tax and make a difference? Consider donating to Daan Patra or any other cause you feel passionate about. Your contribution can help create a lasting impact, and Section 80G can help you save on taxes while you do it! 

By donating to Daan Patra, you can not only make a positive impact on society but also potentially reduce your tax burden under Section 80G. Our mission is to provide care and support for senior citizens in need.

FAQ

1. Can I claim a deduction for donations made in cash?

Yes, but cash donations exceeding Rs. 2,000 are not eligible for a deduction. Donations should preferably be made by cheque, draft, or electronic means.

2. What documentation is required to claim a deduction under Section 80G?

You need a receipt from the donee organization containing:

• The name and PAN of the donee.
• The amount donated.
• The registration number of the institution under Section 80G.

3. How does AGTI affect the limit on deductions under Section 80G?

For donations eligible for deductions subject to 10% of AGTI, the maximum deduction you can claim is 10% of your AGTI. Using the previous example, if your AGTI is Rs. 7,75,000, the maximum deduction allowed under Section 80G would be Rs. 77,500 for those specific donations.

4. What happens if my donations exceed the 10% limit of AGTI?

If your eligible donations exceed 10% of AGTI, you can only claim a deduction up to the 10% limit. The excess amount cannot be carried forward to the next year for deduction purposes.

5. Is AGTI relevant for all types of donations under Section 80G?

No, AGTI is specifically relevant for donations where the deduction is limited to a percentage of AGTI. Donations that qualify for a 100% or 50% deduction without any qualifying limit do not depend on AGTI.

6. Can business income be included in AGTI?

Yes, AGTI includes income from all sources such as salary, business, property, capital gains, and other sources, before applying the specified deductions under sections 80C to 80U (except 80G).

Shikha Rajani

Shikha Rajani is an experienced SEO content writer with three years of experience. She’s passionate about captivating storytelling and excels in creating engaging and informative content that delivers results. With her flexible knowledge base, she can adapt her writing style to suit your needs across different niches.