Inspite of all the contributions made to social causes, there is a huge gap between the demand of money from the needy and the amount donated by philanthropists. This probably, is the reason why the Government has given tax benefits on donations. The amount donated towards charity attracts deduction under section 80G of the Income Tax Act, 1961. Section 80G has been in the law book since financial year 1967-68 and it seems it’s here to stay. Several deductions have been swept away but the tax sop for donations appears to have survived the axe. The main features of tax benefit with respect to charity are as follows:
What kind of Assessee Contribute to 80G?
Any person or ‘assessee’ who makes an eligible donation is entitled to get tax deductions subject to conditions. This section does not restrict the deduction to individuals, companies or any specific category of taxpayer.
What type of Donation is eligible?
Donation in kind do not entitle for any tax benefits. For example, during natural disasters such as floods, earthquake, and many organisations start campaigns for collecting clothes, blankets, food etc. Such donations will not fetch you any tax benefits.
Deduction amount U/s. 80G:
Donations paid to specified institutions qualify for tax deduction under section 80G but is subject to certain ceiling limits. Based on limits, we can broadly divide all eligible donations under section 80G into categories:
What kind of Assessee Contribute to 80G?
Any person or ‘assessee’ who makes an eligible donation is entitled to get tax deductions subject to conditions. This section does not restrict the deduction to individuals, companies or any specific category of taxpayer.
What type of Donation is eligible?
Donation in kind do not entitle for any tax benefits. For example, during natural disasters such as floods, earthquake, and many organisations start campaigns for collecting clothes, blankets, food etc. Such donations will not fetch you any tax benefits.
Deduction amount U/s. 80G:
Donations paid to specified institutions qualify for tax deduction under section 80G but is subject to certain ceiling limits. Based on limits, we can broadly divide all eligible donations under section 80G into categories:
- 100% deduction without any qualifying limit (e.g., Prime Minister’s National Relief Fund).
- 50% deduction without any qualifying limit (e.g., Indira Gandhi Memorial Trust).
- 100% deduction subject to qualifying limit (e.g., an approved institution for promoting family planning).
- 50% deduction subject to qualifying limit (e.g., an approved institution for charitable purpose other than promoting family planning).
What is the Limit?
The qualifying limits u/s 80G is 10% of the adjusted gross total income. The limit is to be applied to the adjusted gross total income. The ‘adjusted gross total income’ for this purpose is the gross total income (i.e. the sub total of income under various heads) reduced by the following:
The qualifying limits u/s 80G is 10% of the adjusted gross total income. The limit is to be applied to the adjusted gross total income. The ‘adjusted gross total income’ for this purpose is the gross total income (i.e. the sub total of income under various heads) reduced by the following:
- 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.
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