Donating a sum of money for social welfare purposes is a noble act. It allows individuals and businesses to contribute towards societal growth and fulfil their social responsibility. To encourage such contributions, the Indian government provides tax relief in the form of deductions under Section 80G and 80GGA of the Income Tax Act.
These sections offer significant tax benefits to taxpayers who donate to eligible funds and institutions.
Section 80G of the Income Tax Act allows taxpayers to claim deductions for donations made to specified relief funds and charitable institutions. This provision applies to all taxpayers, including individuals, companies, partnerships, and others. However, not all donations qualify for a deduction under Section 80G; only contributions to prescribed trusts and organizations are eligible.
The following taxpayers are eligible to claim deductions under Section 80G:
It is crucial to note that taxpayers who have opted for the new tax regime cannot claim deductions under Section 80G.
To claim the deduction under Section 80G of Income Tax Act, you must provide the following information on your Income Tax Return (ITR):
Contributions made to eligible organizations can be deducted from your gross total income, thus reducing your taxable income. However, there are specific conditions attached to this deduction:
1. Not all donations qualify for a full tax deduction. The amount of deduction depends on the type of donation and the organization to which it is made.
2. Donations exceeding ₹2,000 in cash are not eligible for tax deductions. Payments must be made via cheque, draft, or digital modes to qualify.
3. In-kind contributions, such as food, clothing, or medicines, do not qualify for deductions.
The deduction can be 100% or 50% of the donation amount, depending on the organization, with or without a qualifying limit.
Not all donations are eligible for a 100% deduction. The eligibility for deductions depends on the organization receiving the donation. The deduction can either be 100% or 50% of the donation, with or without limits.
You may also want to know Section 185 of Companies Act 2013
Some donations qualify for a 100% deduction without any qualifying limit. These include contributions to:
To calculate the deduction under Section 80G:
1. Identify the category of the organization receiving the donation (100% or 50% deduction, with or without a limit).
2. For donations qualifying for 100% or 50% deduction without a limit, simply claim the respective percentage of the donated amount as a deduction.
3. For donations with a qualifying limit, calculate 10% of the adjusted gross total income to determine the maximum deduction allowed.
4. Apply the deduction percentage (100% or 50%) to the donation amount, subject to the qualifying limit.
Section 80GGA provides deductions for donations made towards scientific research and rural development. Unlike Section 80G, this deduction is available to all taxpayers except those who have income from business or profession.
Eligible donations under Section 80GGA include:
Section 80G and 80GGA provide taxpayers with an excellent opportunity to contribute towards social welfare while also availing tax benefits. Whether it’s for relief funds, a fund set up by the government, charitable institutions, scientific research, or rural development, these sections incentivize philanthropy by reducing taxable income.
However, it is crucial to understand the eligibility criteria, donation limits, and calculation methods to maximize the benefits under these sections.
No, taxpayers who have opted for the new tax regime are not eligible to claim deductions under Section 80G.
Cash donations exceeding ₹2,000 are not eligible for deductions under Section 80G.
No, in-kind donations do not qualify for tax deductions under Section 80G.
Donations made for scientific research or rural development to approved organizations qualify for a 100% deduction under Section 80GGA.
Yes, you can claim deductions under both Sections 80G and 80GGA in the same financial year, provided the donations meet the respective eligibility criteria.
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