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Deductions Made Under Section 80G of the Income Tax Act of 1961

Contributions to specific relief funds and charity organisations are deductible under Section 80G of the Income Tax Act. However, all donations are ineligible for Section 80G deductions.

Only contributions to specified funds are deductible. This deduction is open to all taxpayers, including individuals, corporations, partnerships, and sole proprietorships.

If you choose the new tax regime, you will not be able to claim this deduction.

Who is eligible for claiming deduction under section 80g?

People must be aware that many causes are there in the exemption percentages. Before filing taxes, taxpayers can determine whether their charity activity gets exempted under section 80G of the Income Tax Act.

In theory, everyone is qualified to claim gifts under Section 80G, including businesses and Hindu Undivided Families, and it does, nevertheless, abide by some regulations set down by the government. NRIs are eligible for the 80G tax credit if they contribute to reputable or recognised organisations.

What documents are necessary to apply for tax exemptions under section 80G?

To file a tax return without difficulty, eligible individuals must provide the necessary documentation.

  • Stamped receipt: A person must present a receipt provided by an authorised trust to qualify for a deduction under Section 80G. This receipt must contain the donor’s name, name of the trust, address, amount donated, and other information.
  • Form 58: The submission of Form 58 is a requirement for donations that qualify for a 100% deduction. It includes information on the funds authorised for a project, costs, money collected, etc.
  • Registration number of trust: They must provide the trust’s registration number, provided by the Income Tax Department under Section 80G.
  • Validity of registration: When registering, a donor must determine whether the date is current and comparable to the day of the donation.

They must provide receipts and a photocopy of the 80G certificate in their submission.

Mode of payment under section 80G of the Income Tax Act

This deduction is only available when the contribution is in the form of a cheque, demand draft, or cash. In-kind gifts are not deductible under Section 80G, such as food, materials, clothing, and medications.

Section 80G amendment: Any monetary donations beginning with the fiscal year 2017-18 above Rs 2,000 would not be accepted as a deduction. Gifts over Rs 2,000 must be given to get qualified under Section 80G in any form other than cash, as the earlier cash donation ceiling was Rs 10,000.

Amount of Eligible Donation: The different donations indicated in Section 80G are eligible for a deduction of up to 100% or 50%, with or without limitation, as stipulated in Section 80G.

The benefit under section 80GGC of the Income Tax Act of 1961

A claim for a deduction under section 80GGC may be made by an assessee when determining their total taxable income. Any gift given to a political party or electoral trust in the preceding year is eligible for the deduction. If payment is in cash, the assessee is not permitted to make any deductions. Any local government or artificial juridical entity that receives full or partial funding from the government is not permitted to be the assessee.

“Political party” refers to a political party established under section 29A of the Representation of the People Act, 1951, for the reasons of sections 80GGB and 80GGC.

Limits on tax deductions and percentage

Depending on the kind and organisation to whom the contribution is given, Section 80-G of the IT Act specifies 50% and 100% tax deduction limitations.

Donations “without upper limit”: The donor may submit a claim of 50% or 100% of the donation amount under the “without upper limit” provision without any restrictions.

For instance, the central government established the “Prime Minister’s National Relief Fund” and the “National Defense Fund,” which are entitled to a “no upper limit” condition and a 100% tax deduction. The “Jawahar Lal Nehru Memorial Fund and Prime Minister’s Drought Fund,” in contrast, are trusts that provide only a 50% tax deduction on the amount contributed by the donor.

Donations “With higher limit”: Under the “With upper limit” provision, an assessee may make a deduction of either 100% or 50% of 10% of the individual’s gross adjusted income (as permitted by that specific entity).

Calculating deduction under section 80g

The following factors affect how much of a gift is eligible for a deduction:

1. Deductible amount that qualifies

2. Donor qualification

Illustration: 100% Deduction Subject to 10% of Adjusted Gross Total Income or 100% Deductible Without Qualifying Limit for Donations, and so forth;

In this example, let’s determine the amount that can be deducted from a contribution in accordance with section 80G of the Income Tax Act. Additionally, a 50% deduction of up to 10% of adjusted gross total income is allowed for such contribution.

For example, Mr Arun contributes to the organisation mentioned in Section 10(26BB) to further the interests of the minority group. He contributes Rs. 1,000,000.

Other information includes the following:

Rs. 800,000 is the base wage.

Section 80C deduction of Rs. 150,000

Gains over the Long Term: Rs. 30,000

20,000 rupees in short-term capital gains on the sale of shares under Section 111A.

Conclusion

Even in the twenty-first century, few individuals are aware of gifts’ tax advantages. Regarding collecting the benefits, there is a lack of understanding and awareness. Most salaried people get Form-16s without any indication of a deduction or reimbursement for donations made under Section 80G is a major contributing factor to the problem.

It indicates that tax advantages are not provided to salaried workers at the TDS (tax deducted at source). In this situation, they must include information about their gifts when completing their tax return and request a reimbursement. This approach of exempting the income from charity organisations from taxation might have a negative economic impact. Long-term, it can result in a financial deficit and prove detrimental to collecting taxes.

FAQs

Can my employer process my 80G deduction?

You may submit an 80G deduction claim via your employer, yes. You might need a document from your company proving that the gift was made using your pay for that.

Is it necessary to present my donation receipt to be eligible for a Section 80G deduction?

You are not required to include the receipt with your ITR submission. It is advisable to keep it secure and accessible if the Assessing Officer needs it while conducting the assessment.

Is the 80G donation receipt formatted in any particular way? Where can I get the receipt for my donation?

The Income Tax Department does not provide any particular type of donation receipt. Only the statement of the trust's name, address, registration number, PAN, contribution amount in words and numbers, date of the donation, donor's name, and payment method is necessary.

What does the payment evidence look like if the employer makes the gift with a combined check?

Deductions will be permitted in this situation based on certificates given by employers or DDO (Drawing and Disbursing Officer).

Can I use the 80G tax deduction for all my income, including my salary, rental income, and capital gains?

Yes, you can deduct all income except those taxed at a higher rate. Examples include long-term capital gains, short-term capital gains, etc.

About Author

Eknoordeep is an Advocate. Currently she is working as an Associate with a Law Firm based out of Delhi. She has completed her BA. LL.B( Hons) from Lovely Professional University, Punjab in 2020. She has a good experience in Corporate, Civil and Commercial Laws.

She has a keen interest in the research area and write research papers, articles on current and social issues. Her manuscripts are published with distinguished Journals and Magazines. She is also a core member of Legal Podcast on Spotify (Metanoia). She has worked as an academic writer and content writer with different organisations.

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Tax Law