How can Section 80G & 80GG Help you Avail Tax Benefits?

While India may have stepped down from the number one position of being home to the largest poor populace in the world (as of May 2018, Nigeria has taken the first spot), we still have a long way to go to completely eradicate poverty from our map. And even though it’s difficult to ensure when that’s gonna happen, efforts in the right direction will surely help to take things forward. One such effort is the Section 80G tax deduction.

Section 80G

The Section 80G of the Income Tax Act, 1961, allows you to claim deductions for your charitable contributions and donations. The aim behind this tax deduction was to encourage people to donate more towards social causes and to help in the upliftment of the backward sections of the society.

The section 80G (part of Section 80) works pretty much on the lines of Section 80C and has the following four subsections:

Section 80GG

Under Section 80GG, all individual taxpayers, who do not receive house rent allowance, can claim a tax deduction on the rent paid by them. This deduction, however, is subject to a maximum equivalent of 25% of your total income or Rs 2,000 a month, whichever is lower.

Section 80GGA

Under this section, you can claim tax deductions, provided you do not have any income through any kind of profit/gain from a business or profession. In such a case, if you make donations for the development and enhancement of social/scientific/statistical research or towards the National Urban Poverty Eradication Fund, then you can claim tax deductions on these donations. 

Section 80GGB

Section 80GGB allows only Indian companies to avail tax deductions for their contributions/donations to any political party or any electoral trust that qualifies for the deduction.

Section 80GGC

While Section 80GGB allows only Indian companies to claim deductions, Section 80GGC allows any individual to claim deductions, for his/her donations made to any political party or electoral trust that qualifies for the deduction. However, the benefits of this section do not extend to local authorities and artificial juridical persons.

Is there a maximum deduction limit under Section 80G?

While Section 80G does not impose any maximum limit for tax deductions, in certain specific cases, your donations may either qualify for 50% or 100% tax deduction. Furthermore, sometimes tax deduction on donations is limited to 10% of the Adjusted Gross Income of the donor.

Take a look at the image below for a clearer understanding of tax deductions under Section 80G:

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Deductions Having No Maximum Limit

There are certain donations that have no ceiling on deductions. However, as we said earlier, among these donations, some are eligible for 100% deduction and others are eligible for only 50% deduction.

Here’s a list of funds/donations that are eligible for 100% deduction:

• National Defence Fund set up by the Central Government
• National Foundation for Communal Harmony
• National Blood Transfusion Council or a State Blood Transfusion Council
• National Sports Fund or National Cultural Fund or Fund for Technology Development and Application
• National Illness Assistance Fund
• National Fund for Control of Drug Abuse
• National Children’s Fund
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
• Prime Minister’s National Relief Fund
• Prime Minister’s Armenia Earthquake Relief Fund
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund
• Approved University or Educational Institution of National Eminence
• Any Fund created by the Gujarat State Government 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)
• Fund set up by a State Government for the medical relief to the poor
• Central Welfare Fund of Army or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund
• Africa (Public Contributions – India) Fund
• Andhra Pradesh Chief Minister’s Cyclone Relief Fund
• Zila Saksharta Samiti
• Swachh Bharat Kosh
• Clean Ganga Fund

Any donations made to the following funds are eligible for 50% deduction:

• Jawaharlal Nehru Memorial Fund
• Prime Minister’s Drought Relief Fund
• Indira Gandhi Memorial Fund
• Rajiv Gandhi Foundation

Deductions Having A Maximum Limit (10% of the Adjusted Gross Income)

When it comes to claiming donations limited to 10% of your Adjusted Gross Income, they are also divided under two eligibility categories – 50% and 100%.

Donations eligible for 100% deduction are:

• Donations made to any government institution/organization or any approved local institution/organization to be utilized for charitable causes or dedicated to promoting family planning.
• Any company’s donation to the Indian Olympic Association or to any other notified institution/association, established in India, to encourage the development of infrastructure for sports and games in India as well as to boost the sponsorship of sports and games in India.

Donations eligible for 50% deduction are:

• Donations made to any government or local authority for charitable causes.
• Donations made to an Indian authority/institution to promulgate the development of towns, cities, villages and to minimize the housing issue in India.
• Any other fund or any institution which satisfies the conditions mentioned in Section 80G(5)
• Donations made to any Corporation, as stated under Section 10(26BB), to promote interests of any minority community.
• Donations made to any renowned temple, gurudwara, mosque, church, or any other place of historical or archaeological importance, as notified by the Central Government of India.

How to claim deductions under Section 80G?

Any taxpayer who makes charitable contributions is eligible for claiming tax deductions under Section 80G.

You can claim deductions for your donations at the time of your income tax filing in Form 16. Usually, the employer deducts TDS on the salary of their employees and then pay the remaining salary. The TDS amount is mentioned in Form 16. If you are an employee who wishes to avail the tax benefits of Section 80G deduction, it can only be claimed by your employer provided you’ve made the donation exclusively to the funds whose names we have mentioned above (the ones that do not have any maximum deduction limit).

While claiming these deductions you must keep the following conditions in mind:

• Donations should be made only in the form of cash or cheque. They are eligible for a tax deduction under Section 80G only if their value doesn’t exceed Rs. 10,000. Donations made in, say, food and clothes, aren’t applicable to this deduction.
• From Financial Year 2017-18, donations exceeding Rs 2,000 in cash are not accepted as a deduction. Therefore, donations above Rs. 2,000 should be made in any mode except for cash in order to qualify for any tax deduction.
• You must furnish a stamped receipt of the institution/trust where you made the donation at the time of claiming the deduction. This receipt should contain all your necessary details such as your name, your address, your PAN, the amount of money donated, and the name, address, and registration number of the charitable institution/trust (as provided by the Income Tax Department under Section 80G).

Note: In case your donation is 100% tax deductible, you will need to obtain Form 58 from the charitable institution/trust. Without this form, your application for the tax deduction may be rejected.

That’s all you need to know about Section 80G. With so many ways to claim tax benefits under Section 80G, charity certainly seems more appealing. Your contributions can not only help alleviate the poorer sections of the country, but it can also help you minimize your tax liability.

It’s a total win-win!

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