Tax Deduction under Section 80G (Deduction in respect of donations to certain funds, charitable institutions, etc.)of Income Tax Act, 1961

Dated: September 24, 2018

Section 80, starting from 80A to 80VV is all about tax deduction allowed to a person or any legal entity (companies or firms) in various preset conditions  as mentioned under those sections. Thus by providing the tax deduction, it provides an incentive for the companies for their growth as well as servers as an important tool for achieving economic and social objective. This fact is very well acknowledged by the Income Tax Department by the virtue of section 80G.

 

SECTION 80G
Section 80G is one such section which talks about the donations made to certain relief funds or charitable organisations and the deductions allowed therein. The aim of this section to provide incentive to the individual or the firm which indulges in donations and  other such activities.
The deduction under this section can only be claimed when the contribution has been made in the form of cheque or draft or cash. Starting from the financial year 2017-2018, the contribution of any amount exceeding Rs. 2000 is to be done in any form other than cash. Deduction is not allowed on contributions like food material, clothes, water, medicines, etc.
Donation to a category of charitable organisation is subject to different tax exemption. The tax deduction for some institution is 50% and while for other is 100%. But these are also further categorised and hence, the deductions so non-state organisations i.e. private organisations is limited to 50 or 100% of tax deduction subject to maximum of 10% of the adjusted gross annual Income.
So, the four categories are as,
1.    Institutions where 100% donation is eligible for deduction without any upper limit.
2.    Institutions where 50% donation is eligible for deduction without any upper limit.
3.    Institutions where 100% donation is eligible for deduction subject to maximum limit of 10% of Adjusted Gross Total Income.
4.    Institutions where 50% donation is eligible for deduction subject to maximum limit of 10% of Adjusted Gross Total Income.
NRIs are also entitled to claim tax benefits for contributions made.

QUALIFYING LIMIT FOR DEDUCTION UNDER SECTION 80G

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
•    Short- term capital gains taxable @15 per cent under section 111A.
•    Income referred to in Sections 115A, 115AB, 115AC, 115AD relating to non-residents and foreign companies.
SO, it goes as,
Adjusted Gross Total Income = Gross Total Income – [Amount deductible under Sections 80CCC to 80U (but not Section 80G) + Exempt income + Long-term capital gains +Short- term capital gains taxable @15 per cent under section 111A + Income referred to in Sections 115A, 115AB, 115AC, 115AD relating to non-residents and foreign companies.  ]

Total Taxable Income = Adjusted Gross Total Income – Deduction under Section 80G.
In the case of CIT v. Rajmata Shri Gulabkunvarba Sahiba of Navanagar , deduction on account of donations under section 80G(4) has to be allowed with reference to ten per cent, of the gross total income without reducing the same by the amount of annuity deposit.

DONATION AND TAX EXEMPTION UNDER SECTION 80G

Donations Eligible for 100% Deduction Without Qualifying Limit
•    National Defence Fund set up by the Central Government
•    Prime Minister’s National Relief Fund
•    National Foundation for Communal Harmony
•    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, 1996
•    The 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 earthquake in Gujarat
•    Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of 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)


Donations Eligible for 50% Deduction Without Qualifying Limit
•    Jawaharlal Nehru Memorial Fund
•    Prime Minister’s Drought Relief Fund
•    Indira Gandhi Memorial Trust
•    Rajiv Gandhi Foundation

Donations Eligible for 100% Deduction Subject to 10% of Adjusted Gross Total Income
•    Government or any approved local authority, institution or association to be utilised for the purpose of promoting family planning
•    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 in India.


Donations Eligible for 50% Deduction Subject to 10% of Adjusted Gross Total Income
•    Any other fund or any institution which satisfies conditions mentioned in Section 80G(5)
•    Government or any local authority to be utilised for any charitable purpose other than the purpose of promoting family planning
•    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
•    Any corporation referred in Section 10(26BB) for promoting interest of minority community
•    For repairs or renovation of any notified temple, mosque, gurudwara, church or other place.


CORPORATE SOCIAL RESPONSIBILITY AND BENEFITS UNDER SECTION 80G
India is the first country which made CSR mandatory following an amendment to the Companies Act, in the year 2013. CSR is a concept which can be defined as, the obligation of a company operating within the society to contribute towards the economic, social and environmental development that creates positive impacts on society at large.   The details of the CSR are mentioned in Section 135 of the Companies Act. The CSR activities in India should not be undertaken in the normal course of business and must be with respect to any of the activities mentioned in Schedule VII of the act.
The following activities mentioned under Schedule VII of the Companies Act 2013 contribute to CSR:
•    Eradicating hunger, poverty and malnutrition, promoting preventive healthcare,
•    Promoting education and promoting gender equality,
•    Setting up homes for women, orphans and the senior citizens, measures for reducing inequalities faced by socially and economically backward groups,
•    Ensuring environmental sustainability and ecological balance, animal welfare,
•    Protection of national heritage and art and culture,
•    Measures for the benefit of armed forces veterans, war widows and their dependents,
•    Training to promote rural, nationally recognized, Paralympic or Olympic sports,
•    Contribution to the prime minister’s national relief fund or any other fund set up by the Central Government  for socio economic development and relief and welfare of  SC, ST, OBCs, minorities and women,
•    Contributions or funds provided to technology incubators located within academic institutions approved by the Central Government,
•    Rural development projects,
•    Slum area development.

 

DOCUMENTS REQUIRED FOR CLAIMING TAX DEDUCTION U/S 80G

In order to claim tax deduction under this section, following documents are required:

 1. Stamped receipt:  For claiming deduction under Section 80G, a receipt issued by the recipient trust is a must. The receipt must contain the name , address & PAN of the Trust, the name of the donor, the amount donated (please ensure that the amount written in words and figures tally). In case of donation which are eligible for 100% deduction recipient should also insist on form 58 from trust. Form 58 contains the details of project cost (for which the donation is received), amount authorised under this project and the actual amount collected. Without form 58, the claim for 100% deduction could be rejected even if the receipt mentions 100% deduction.

2. Mention of Registration No. of the Trust Under 80G on receipt:- The most important requirement is the Registration number issued by the Income Tax Department under Section 80G. This number must be printed on the receipt. Generally, the Income Tax Department issues the registration for a limited period (of 2 years) only. Thereafter, the registration has to be renewed. The receipt must not only mention the Registration number but also the validity period of the registration.

 3. Validity of Registration U/s. 80G  on the date of Donation:- The donor must ensure that the registration is valid on the date on which the donation is given. For example, the registration of a trust may be valid from April 1, 2007 to March 31, 2009. Now, if the trust does not get its registration renewed on or after April 1, 2009 then even if donation receipt is issued by the trust to the donor for donations received on or after April 1, 2009, the donor would not get any tax benefit.

 4. Photocopy of the section  80G certificate :- Check the validity period of the 80G certificate. Always insist on a photocopy of the 80G certificate in addition to the receipt.


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