Section 80G of the Income Tax Act, 1961, offers tax benefits to individuals and organizations making donations to specified relief funds and charitable institutions. This provision is designed to encourage philanthropy and support social causes by providing tax incentives to donors. Understanding the specifics of Section 80G can help taxpayers reduce their taxable income while contributing to societal welfare.

Eligibility for Section 80G Deductions

1. Who Can Claim?
   • Individuals: Both salaried and self-employed individuals can claim deductions under Section 80G.
   • Hindu Undivided Families (HUFs): HUFs can also avail of these tax benefits.
   • Companies: Corporate entities making donations to eligible institutions can claim deductions.
   • Firms: Partnerships and other firms are eligible for the benefits of Section 80G.
2. Eligible Donations
   • Specified Funds and Institutions: Donations must be made to funds and charitable institutions specified under Section 80G. These include government-recognized trusts, NGOs, and relief funds.
   • Cash and Non-Cash Donations: Both cash and non-cash donations are eligible, but cash donations exceeding ₹2,000 are not eligible for deductions to promote banking and digital transactions.

Types of Donations and Their Deductions

Section 80G categorizes eligible donations into different groups, each with varying deduction limits:

1. 100% Deduction Without Limit
   • Prime Minister’s National Relief Fund: Donations made to this fund are eligible for a 100% deduction without any qualifying limit.
   • National Defence Fund: Contributions to this fund also qualify for a 100% deduction.
2. 50% Deduction Without Limit
   • Jawaharlal Nehru Memorial Fund: Donations to this fund receive a 50% deduction without any upper limit.
   • Prime Minister’s Drought Relief Fund: Contributions are eligible for a 50% deduction.
3. 100% Deduction Subject to 10% of Adjusted Gross Total Income
   • Donations to the Government or any Approved Local Authority, Institution, or Association for the Promotion of Family Planning: Such donations are eligible for a 100% deduction, but the total must not exceed 10% of the donor’s adjusted gross total income.
4. 50% Deduction Subject to 10% of Adjusted Gross Total Income
   • Other Approved Charitable Institutions: Donations to other recognized institutions fall under this category, with a 50% deduction available, subject to the 10% limit.

Calculating the Deduction

1. Determine Adjusted Gross Total Income:
   • Adjusted gross total income is calculated by subtracting deductions under Sections 80C to 80U, excluding Section 80G itself, from the gross total income.
2. Apply the Deduction Limits:
   • Based on the type of donation, apply the appropriate percentage (100% or 50%) and check if the total donations are within the allowable limit (if applicable).
3. Aggregate Limit Application:
   • Ensure that the aggregate amount of donations eligible for deduction under the 10% limit categories does not exceed 10% of the adjusted gross total income.

Process to Claim Section 80G Deductions

1. Obtain Donation Receipts:
   • Ensure that you receive a valid receipt from the charitable organization, which should include details like the name and address of the trust, PAN number, the amount donated, and the registration number of the trust under Section 80G.
2. File Income Tax Return:
   • While filing your income tax return, include the total donations made under Section 80G and provide the necessary details and receipts to claim the deduction.
3. Maintain Records:
   • Keep all receipts and relevant documents for future reference and potential verification by tax authorities.

Importance and Benefits

1. Encourages Philanthropy:
   • Section 80G incentivizes individuals and businesses to contribute to social causes and support non-profit organizations, promoting a culture of giving.
2. Tax Savings:
   • By reducing taxable income, Section 80G helps donors save on income tax, making it a financially beneficial way to support charitable activities.
3. Supports Social Welfare:
   • Donations under Section 80G channel funds towards various social welfare projects, including education, healthcare, disaster relief, and more, contributing to national development.

Conclusion

Section 80G of the Income Tax Act is a valuable provision for taxpayers who wish to support charitable causes while availing of tax benefits. By making eligible donations and claiming deductions under Section 80G, individuals and organizations can contribute to societal welfare and reduce their taxable income. Al ASHRAF Trust encourages everyone to take advantage of this provision to support charitable activities and help create a better society.