Section 80G of the Income Tax Act provides benefits for both donor and donee, by making a donation taxpayer (donor) will get benefit by way of deduction from his Income, and by accepting the donation, trust (donee) will get benefit in respect of funds received for his welfare. In this post, we will discuss complete Section 80G of The Income Tax Act, 1961 in two parts-
- one part is for donee and,
- second part is for donor.
Section 80G of the Income Tax Act- Donee
What is Section 80G of the Income Tax Act
The Income Tax Act allows, deduction while calculating the total taxable Income to every assessee. One such deduction is allowed under section 80G of the Income Tax Act, 1961 for donations made to a charitable organization or a trust. Along with this, the deduction is also available for donation to specified political party, research organization, and electoral trust.
Who can claim deduction under section 80G
This deduction is not restricted to any specific category of person and it can be claimed by any taxpayers- whether resident or non-resident, whether Individual, company, firm, or any other person under the Act. Here are two things that need to remember-
- The taxpayer must submit relevant proof of their contribution.
- The contribution to the charitable organization must be made from one’s taxable income. Donation made from one’s non-taxable Income will not be considered for deductions.
- Contribution made to trusts registered outside India are not eligible for tax deductions.
What mode of payment is allowed as a deduction under section 80G of the Income Tax Act
80G payment mode- The deduction under section 80G of the Income Tax Act, 1961 can only be claimed when payment is made via a cheque, draft, or in cash.
80G deduction if payment in cash- As per budget 2017, w.e.f FY 2017-18 onwards payment made in cash in excess of Rs. two thousand will not be eligible for deduction under section 80G of the Income Tax Act.
How to claim 80G Tax exemption
Proof of payment is of paramount importance when claiming deductions under section 80G of the Income Tax Act for charitable contributions. For a successful tax deduction, it needs to ensure that you must collect receipts of your donation from the charity you donated to, and the receipts must have the name of the donor and donee, amount donated, registration number of the charity, etc. For claiming 80G Tax Exemption the following details have to be submitted in your Income Tax Return.
- Name of the donee
- PAN number of the donee
- Address of the donee
- Amount of contribution made
Apart from the above form 58 is also essentials if a donor intended to claim a 100% deduction on a donation, without which their donation will not be eligible for 100% deduction.
What is the section 80G Deduction Limit?
80G deduction eligibility- The first thing to remember is that donations made to prescribed relief funds and charitable institutions are only eligible for deduction and not all donations made are eligible for 80G tax exemption.
80G deduction limit- The second thing to remember is that there is also limits of % on the amount of donation made i.e 100% or 50%, which can be claimed accordingly.
Section 80G of the Income Tax Act can be broadly classified under four categories as mentioned below-
- Donation with 100% deduction (without any qualifying limit)
- Donation with 100% deduction (Subjected to 10% of adjusted gross total income)
- Donation with 50% deduction (without any qualifying limit)
- Donation with 50% deduction (Subjected to 10% of adjusted gross total income)
80G deduction calculation points
Following points are relevant while calculating the 80G deduction for the qualifying amount.
What is the qualifying amount– Qualifying amount refers to 10% of Adjusted Total Income or the donation/contributions made (excluding the donation/contribution made for non-qualifying amount) whichever is less.
What is adjusted total income- It is very simple to calculate, It is gross total income (sum of income under all heads) excluding the following incomes-
- Amount deductible under Sections 80CCC to 80U (but not Section 80G)
- Exempt income
- Long-term capital gains
- Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies
Donation with 100% deduction – without any qualifying limit
80G deduction list- Donee/Notified Funds | 80G Deduction Limit |
---|---|
National Defence Fund set up by the Central Government | 100% |
Prime Minister’s National Relief Fund | 100% |
National Foundation for Communal Harmony | 100% |
An approved university/educational institution of National eminence | 100% |
Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district | 100% |
Fund set up by a State Government for the medical relief to the poor | 100% |
National Illness Assistance Fund | 100% |
National Blood Transfusion Council or to any State Blood Transfusion Council | 100% |
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities | 100% |
National Sports Fund | 100% |
National Cultural Fund | 100% |
Fund for Technology Development and Application | 100% |
National Children’s Fund | 100% |
Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory | 100% |
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 | 100% |
The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993 | 100% |
Chief Minister’s Earthquake Relief Fund, Maharashtra | 100% |
Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat | 100% |
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 | 100% |
Prime Minister’s Armenia Earthquake Relief Fund | 100% |
Africa (Public Contributions – India) Fund | 100% |
Swachh Bharat Kosh (applicable from FY 2014-15) | 100% |
Clean Ganga Fund (applicable from FY 2014-15) | 100% |
National Fund for Control of Drug Abuse (applicable from FY 2015-16) | 100% |
Donation with 100% deduction – Subjected to 10% of adjusted gross total income
80G deduction list- Donee/Notified Funds | 80G Deduction Limit |
---|---|
Donations to the government or any approved local authority, institution, or association to be utilized for the purpose of promoting family planning | 100% |
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 | 100% |
Donation with 50% deduction – without any qualifying limit
80G deduction list- Donee/Notified Funds | 80G Deduction Limit |
---|---|
Jawaharlal Nehru Memorial Fund | 50% |
Prime Minister’s Drought Relief Fund | 50% |
Indira Gandhi Memorial Trust | 50% |
Rajiv Gandhi Foundation | 50% |
Donation with 50% deduction – Subjected to 10% of adjusted gross total income
80G deduction list- Donee/Notified Funds | 80G Deduction Limit |
---|---|
Any other fund or any institution which satisfies the conditions mentioned in Section 80G(5) | 50% |
Government or any local authority, to be utilized for any charitable purpose other than the purpose of promoting family planning | 50% |
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 | 50% |
Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community | 50% |
For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places. | 50% |
Section 80G of the Income Tax Act- Donor
Who is required to get registered u/s 80G of the Income Tax Act
Under section 80G trust or institution can seek registration and it does not apply to religious trusts or institutions. Whereas the scheme of exemption u/s 12A applies to both charitable as well as religious trusts.
Eligibility of section 80G registration
Not all NGOs or trusts are eligible for 80G certification. There are certain rules which need to be followed to obtain it. Here are some details under which the government can reject your claim for registration or say certificate u/s 80G.
1. Separation of Business & Charity:- As a non-profit organization, if the entity is involved in any business/financial transactions which do not account for donations alone, you might have to segregate it. If not, your 80G certification request will be rejected.
2. No Misuse: The donations received so far, towards the cause should not be misused on any account or used for any other purpose, even within the organization. A strict accounting is essential to show as proof.
3. No Religious Activity: Any NGO/Trust, which is operated as a part of an activity that involves religious preaching, or for a particular caste or creed is not eligible for 80G certification.
4. Proper Accounting: As mentioned earlier, the accounting books and all transactions should be kept as proof before applying for 80G. These documents will be scrutinized thoroughly before 80G certification is issued.
Documents required for registration u/s 80G
To get registered u/s 80G, the organization needs to submit Form 10G to the Jurisdictional Principal Commissioner or Commissioner of Income Tax (exemption) along with the following documents-
- Registration Certificate and MOA/Trust Deed,
- No Objection Certificate (NOC) from the Landlord (where the registered office is situated),
- Copy of PAN card of the NGO,
- Address Proof, as in the copy of Electricity Bill/House tax Receipt/Water Bill,
- Proof of the welfare activities carried out & Progress Report since incorporation or else, last 3 years,
- List of governing body board of trustees members with their contact details
- The Statement of Accounts, Balance Sheet, Income Tax Return documents since incorporation or else, last 3 years,
- List and details of donors, such as their address and PAN,
- Copy of Registration u/s 12A or copy of notification issued under section 10(23)or section 10(23C).
Certificate under section 80G of the Income Tax Act
Scrutiny of Documents- On receipts of the application, The Principal Commissioner or Commissioner of Income Tax will scrutinize the form 10G and other documents submitted by the applicant. He may ask for some additional documents or any information.
Pass Order- After complete scrutiny, he may pass an order in writing registering the applicant under section 80G of the Income Tax Act. If not, he may reject the application. On approval, he will issue certificate u/s 80G.
Time Limit- The time limit by which The Principal Commissioner or Commissioner of Income Tax has to pass an order, of either approval or rejection, shall not exceed 6 months from the end of the month in which such application was made.
Online apply for regitration under Section 80G of the Income Tax Act
Now the question is can we apply online for 80G registration. The answer to this question is ‘yes.
80G Registration online- As we discussed above for 80G registration, form 10G with supporting documents need to be submitted to the Jurisdictional Principal Commissioner or Commissioner of Income Tax (exemption) and for 80G registration online all the same documents need to be submitted through the Income Tax Portal. The applicant needs to submit these documents by login in or registering at the portal.
Frequently Asked Questions
-
What is section 80G of the Income Tax Act describe?
The Income Tax Act allows, deduction while calculating the total taxable Income to every assessee. One such deduction is allowed under section 80G of the Income Tax Act, 1961 for donations made to a charitable organization or a trust. Along with this, the deduction is also available for donation to specified political party, research organization, and electoral trust.
Section 80G of the Income Tax Act provides benefits for both donor and donee, by making a donation taxpayer (donor) will get benefit by way of deduction from his Income, and by accepting the donation, trust (donee) will get benefit in respect of funds received for his welfare.
-
How is 80G deduction calculated?
Section 80G of the Income Tax Act can be broadly classified under four categories as mentioned below-
Donation with 100% deduction (without any qualifying limit)
Donation with 100% deduction (Subjected to 10% of adjusted gross total income)
Donation with 50% deduction (without any qualifying limit)
Donation with 50% deduction (Subjected to 10% of adjusted gross total income)Following points are relevant while calculating the 80G deduction for the qualifying amount-
Qualifying amount- Qualifying amount refers to 10% of Adjusted Total Income or the donation/contributions made (excluding the donation/contribution made for non-qualifying amount) whichever is less.
Adjusted Total Income- It is very simple to calculate, It is gross total income (sum of income under all heads) excluding the following incomes-
*Amount deductible under Sections 80CCC to 80U (but not Section 80G)
*Exempt income
*Long-term capital gains
*Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies -
Who can claim deduction u/s 80G?
Section 80G deduction is not restricted to any specific category of person and it can be claimed by any taxpayers- whether resident or non-resident, whether Individual, company, firm, or any other person under the Act.
-
Which donation is eligible for 100% deduction?
Following donation are eligible for 100% deduction under section 80G of the Income Tax Act, 1961.
National Defence Fund set up by the Central GovernmentPrime Minister’s National Relief Fund
National Foundation for Communal Harmon
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, 1996The 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)
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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)