Understanding Section 80G Deduction & Tax Benefits

The Income Tax Act's Section 80G deduction permits some charitable contributions made in India to be deducted from taxable income. However, non-profit organisations must obtain the necessary paperwork, including an 80G Certificate, in order to qualify for such deductions and tax benefits.

Section 80G

Under the Income Tax Act, certain contributions or donations are eligible for a tax deduction under Section 80G Certificate. NGOs and other non-profit organisations must register and validate themselves with the Income Tax Department to receive such certifications. 

Since such organisations attract donations from corporations and individuals, they must have stringent measures to ensure transparency and efficiency. The government provides such organisations with various tax benefits and deductions as they perform charitable activities. 

It is common for us to consider donating to charity and contributing to society in some way. Due to the noble nature of this gesture, the government provides tax deductions for donations to charitable organizations. Contributions to relief funds and charitable institutions are deductible under section 80G certificate of the Indian Income Tax Act. As a result, you can take advantage of Section 80G deduction in addition to Section 80C to save as much tax as possible.

Generally, if you have donated to charitable trusts or section 8 companies or organisations, you are entitled to an 80G certificate, which exempts you from paying taxes in part or full.

Eligibility to Claim Deduction Under Section 80G Deduction:

The following taxpayers can claim the deduction provided in this section:

• Individuals
• Companies
• Firms
• Hindu Undivided Firm (HUF)
• Non-Resident Indian (NRI)
• Any other person

It is important to note that not all donations are eligible for deductions under Section 80G. Only donations made to prescribed funds are qualified for this deduction.

Please remember that if you choose the new tax regime, this deduction will not be available to you.

Eligibility for Section 80G Exemptions

Only donations to charities under Section 80G are eligible for an 80G deduction and registration. Most charities with a religious or business angle do not receive 80G certification. Similarly, gifts made to trusts outside India are not eligible for such a tax deduction. Additionally, individuals who donate to private trusts that do not have an 80G registration or to political parties cannot avail of any NGO donation tax exemption for the amounts donated. Such contributions and donations will still be a part of their taxable income.

As per Budget 2020, every charitable trust or institution registered under 80G must submit a statement of donations received. Donors will receive tax benefits under Section 80G based on the information furnished by the charitable trust or institution.

How to Calculate 80GG? How to Claim 80GG?

Section 80GG is a deduction for donations made to certain approved charitable organisations. Taxpayers must attach a donation receipt from the eligible charitable organisation to claim the deduction to their income tax return. The donation receipt must specify the name of the taxpayer, the amount donated, and the date of donation.

To calculate the deduction under Section 80GG, taxpayers must first determine their adjusted gross total income (AGTI). The AGTI is calculated by subtracting certain deductions from the taxpayer’s total income, such as the deduction for house rent allowance (HRA) and the deduction for leave travel allowance (LTA).

Once the AGTI has been determined, taxpayers must calculate the amount of the donation eligible for deduction. The donation is eligible for a deduction of up to 10% of the taxpayer’s AGTI.

For example, suppose a taxpayer’s AGTI is ₹10 lakhs, and they donate ₹1 lakh to an eligible charitable organisation. In that case, they will be eligible for a deduction of ₹1 lakh under Section 80GG.

Taxpayers can claim the deduction under Section 80GG by filing their income tax returns online or offline. When filing their return online, taxpayers must select the option for 

“Donations under Section 80GG” and enter the donation details. When filing their return offline, taxpayers must attach the donation receipt.

What Is the Mode of Payment Under Section 80G?

Taxpayers can claim Section 80G deductions when they make donations using the following methods:

• Cheque
• Demand draft
• Cash for donations below ₹2,000
• It’s important to note that in-kind contributions such as food, material, clothes, medicines and donations exceeding ₹2,000 do not qualify for deductions under Section 80G. Donations above ₹2,000 must be made through modes other than cash to be eligible for deduction under Section 80G.

Section 80G specifies various types of donations that are eligible for deductions, ranging from 100% to 50% with or without restrictions, as outlined in the provisions of Section 80G.

What Are the Tax Deductions Under 80G?

Taxpayers are eligible for an exemption under 80G if they comply with certain specifications regarding the mode of payment, percentage eligible for a deduction, and so on. Here’s a quick look at those criteria that make individuals eligible for a tax 80TTB deduction

• Payment Mode

All contributions made to charitable institutions must be through cheques or demand drafts. In the case of a cash contribution, the amount donated must be below ₹10,000 to be eligible for a tax deduction. Any contributions, like clothes, gift items, or food, cannot be claimed as an NGO donation tax exemption.

• Percentage of Contribution Eligible for Deductions

Not all funds come under the 80G category, and only donations to individual funds receive a 100% tax exemption for the amount paid. The others are eligible for a 50% tax exemption. Additionally, any donations made to a trust or NGO that do not have an 80G certification are not eligible for donation to NGO registration tax exemption. It is, therefore, essential for trusts, NGOs, and welfare societies looking for donations from fellow citizens to go ahead and apply for an 80u Income tax.

Documents Required for Section 80G

If you have donated to a fund or a charitable institution with an 80G certificate, you must submit the following documents when filing your returns.

• Stamped Receipt

All trusts and organisations receiving donations must provide a stamped receipt for the funds gained. Individuals must ensure they keep this receipt safe and submit it while filing tax returns to claim exemptions. The receipts should contain the organisation’s name, official stamp, PAN number, and date of issue.

• Form 58

For donations made towards funds with 100% exemptions, individuals must submit Form 58 as received from the organisation. The receipt should contain the organisation’s 80G registration number. While all receipts from registered organisations must have the number printed, individuals must request it specifically in case they cannot locate it on the receipt.

Eligibility for 80G Certification

Not all NGOs or trusts are eligible for 80G certification, as there are certain rules and guidelines regarding what non-profits are eligible for. Here is a quick look at the several conditions organisations have to meet to obtain an 80G certification: 

1. Separation of Business and Charity: If your organisation is involved in any business apart from its charitable component, you will have to segregate it to receive an 80G exemption certificate
2. No Misuse: The donations received towards the cause should not be misused on any account or used for any other purpose, even within the organisation. Hence, all such organisations have to maintain strict accounting principles to prove they have not misused any funds
3. No Religious Activity: Any NGO or trust that engages in religious preaching, or works for a particular caste or creed, is not eligible for 80G certification
4. Proper Accounting: As mentioned earlier, organisations must maintain accurate and up-to-date accounting books and records of financial transactions as proof before applying for an 80G exemption
5. Appropriate Registration: The organisation must be with registration under the Societies Registration Act of 1860 or Section 25 of the Companies Act of 1956.

Tax Benefits to the Organisation

The certification helps donors reduce their tax liability by 10% to 50% on the amount donated. However, the 80 G certification does more than allow donors to claim NGO donation tax exemption on their donations. It also provides organisations with several tax benefits. The institution can get an exemption of 10% for the gross income obtained through donations and contributions. 

Moreover, the Income Tax Department: https://incometaxindia.gov.in/Pages/default.aspx has the power to approve or reject such requests upon disqualification of the non-profit organisation or dissatisfaction with its activities. While the primary role of 80G certification is to encourage donors to donate funds to non-profit organisations, it can help organisations in several ways. 

80g Registration: How to Apply for an 80G Certificate

An 80G certification is a document issued by the Income Tax Department to certain not-for-profit organisations, allowing their donors to avail of tax deductions on donations. Hence, NGOs and other non-profit organisations must obtain an 80G registration at the earliest to increase their donations. To apply for an 80G certificate, organisations must first obtain a 12A certificate. Next, the organisation has to duly fill and submit Form 10G, along with a copy of their activity report for the past one to three years. Additionally, non-profits must also provide an audited statement for the past three years to complete the verification process. 

While the Income Tax Department’s website contains a copy of the 80G application form, the registration process is arduous. Hence, most non-profits take the help of professional legal service providers to complete their 80G registration. Since even a small error made while filing can create long delays, it is advisable to get expert assistance for this process. Also, the IT department will scrutinise your application, activity report, and audited statement before approving your application. To make the registration process easy and efficient, reach out to Vakilsearch. Then, let us handle the filing of your 80G application. Our legal representatives will arrange all the necessary documentation and apply your process of ITR filing.

How to Claim the Deduction Under Section 80G?

To claim the deduction under Section 80G, taxpayers must attach a donation receipt from the eligible charitable organisation to their income tax return. The donation receipt must specify the taxpayer’s name, the amount donated, and the date of donation.

• Name of the recipient (donee)
• PAN (Permanent Account Number) of the recipient (donee)
• Address of the recipient (donee)
• Contribution amount, specifying the breakdown of cash and other modes of payment
• The amount eligible for deduction

These details should be mentioned in the respective tables provided in the ITR (Income Tax Return) form:

• Table A: For donations eligible for 100% deduction without a qualifying limit
• Table B: For donations eligible for a 50% deduction without a qualifying limit
• Table C: For donations eligible for 100% deduction subject to a qualifying limit
• Table D: For donations eligible for a 50% deduction subject to a qualifying limit

List of Donations Eligible Under Section 80G and 80GGA

The following types of donations are eligible for deduction under Section 80G and 80GGA:

• Donations to charitable organisations that provide relief to people experiencing poverty and needy
• Donations to charitable organisations that promote education and research
• Donations to charitable organisations that promote rural development
• Donations to charitable organisations that promote sports and culture
• Donations to certain religious organisations

List of Donations Eligible for 100% Deduction Without Qualifying Limit

The following are eligible for deductions under Section 80G:

• National Defence Fund set up by the Central Government
• Prime Minister’s National Relief Fund
• National Foundation for Communal Harmony
• Approved university/educational institution of National eminence
• Zila Saksharta Samiti is constituted in any district under the chairmanship of the Collector of that district
• Fund set up by a state government for medical relief to the poor
• National Illness Assistance Fund
• National Blood Transfusion Council or 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 concerning any State or Union Territory
• Army Central Welfare Fund, Indian Naval Benevolent Fund, or Air Force Central Welfare Fund
• Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
• Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• A fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
• Any trust, institution, or fund eligible under Section 80G(5C) for providing relief to the victims of the earthquake in Gujarat (contribution made between January 26, 2001, and September 30, 2001)
• 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)

List of Donations Eligible for 50% Deduction Without Qualifying Limit

The following types of donations are eligible for a 50% deduction without any qualifying limit:

• Donations to the Prime Minister’s National Relief Fund
• Donations to the National Defence Fund
• Donations to the National Foundation for Communal Harmony
• Donations to the National Blood Transfusion Council
• Donations to certain government-approved relief funds

However, from FY 2023-24 onwards, donations made to the last three funds mentioned above will no longer be eligible for deductions.

List of Donations Eligible for 100% Deduction Subject to 10% Of Adjusted Gross Total Income

The following types of donations are eligible for a 100% deduction, subject to a maximum of 10% of the taxpayer’s AGTI:

• Donations to scientific research institutions
• Donations to educational institutions
• Donations to rural development organisations
• Donations to certain religious organisations

How Does Deduction Under Section 80G Benefit Different Types of Taxpayers?

• Tax Benefit Example for AY 2023-24:

  Let’s consider Mr. A, an individual, and M/s. Q Pvt. Ltd., a company, who each donate Rs 2,00,000 to a charitable organization during the financial year 2023-24. Their total income for the year is also Rs 10,00,000. We’ll calculate the tax benefits using the updated provisions of Section 80G for AY 2023-24.

Here is the revised table showcasing the tax benefits for Mr. A and M/s. Q Pvt. Ltd. based on the given details:

Particulars	Mr. A	M/s. Q Pvt. Ltd.
i) Income for the financial year 2023-24	Rs 10,00,000	Rs 10,00,000
ii) Donation made to NGO	Rs 2,00,000	Rs 2,00,000
iii) Qualifying amount for deduction (50% of the donation made)	Rs 1,00,000	Rs 1,00,000
iv) Amount of deduction u/s 80G (gross qualifying amount subject to maximum limit of 10% of adjusted gross total income)	Rs 1,00,000	Rs 1,00,000
v) Adjusted gross total income (income – deduction under Section 80G)	Rs 9,00,000	Rs 9,00,000
A. Tax payable after considering the donation
Mr. A’s tax calculated based on the new income tax slab rates for AY 2023-24	(To be calculated based on Mr. A’s specific income bracket)	N/A
M/s. Q Pvt. Ltd.’s tax calculated at 30% on adjusted gross income	Rs 2,70,000	Rs 2,70,000
B. Tax payable before donation
Mr. A’s tax calculated based on the income tax slab rates for AY 2023-24 without considering the deduction	(To be calculated based on Mr. A’s specific income bracket)	N/A
M/s. Q Pvt. Ltd.’s tax calculated at 30% on gross income	Rs 3,00,000	Rs 3,00,000
C. Tax Benefit from Section 80G deduction
Mr. A’s tax savings depend on his income bracket	(Calculate the difference between Mr. A’s tax with and without the deduction)	N/A
M/s. Q Pvt. Ltd.’s tax saving	Rs 30,000	Rs 30,000

 

List of Donations Eligible for 50% Deduction Subject to 10% Of Adjusted Gross Total Income

The following are also eligible for deductions under Section 80G:

• Any other fund or institution that meets the conditions specified in Section 80G(5).
• Government or any local authority when the donation is intended for any charitable purpose other than promoting family planning.
• Any authority constituted in India to address the housing accommodation needs or to plan, develop, or improve cities, towns, villages, or both.
• Any corporation referred to in Section 10(26BB) that promotes the interest of the minority community.
• Donations made for the repairs or renovation of any notified temple, mosque, gurudwara, church, or other places of worship.

Documents Required to Claim a Tax Deduction on Donations

To claim tax deduction under Section 80G, taxpayers must possess the following supporting documents:

• Duly stamped receipt: It is essential to obtain a receipt from the charity or trust to which the donation amount is given. The receipt should include important details like your name, address, donated amount, PAN number of the trust, etc.
• Form 58: If the donor intends to claim a 100% deduction, Form 58 is required to be submitted.
• Trust registration number: All eligible trusts under Section 80G are assigned a registration number by the Income Tax Department. Donors should ensure that the receipt includes the trust registration number.

Section 80GGA

Deductions for donations made towards scientific research or rural development are permitted under Section 80GGA. This deduction is available to taxpayers except those with income or loss from a business and a profession.

Mode of Payment for Claiming Deduction Under Section 80GGA

Donations can be made through cheque, draft, or cash. However, it’s important to note that cash donations exceeding Rs 2,000 are not eligible for deductions. The entire amount donated or contributed is eligible for a deduction of 100%.

List of Donations Eligible Under Section 80GGA

Under Section 80GGA, the following payments are eligible for deductions:

• Payments made to a research association engaged in scientific research or to a college, university, or other approved institution for scientific research, as approved by the prescribed authority under Section 35(1)(ii).
• Payments made to a research association involved in social science or statistical research or to a college, university, or other approved institution for the same purpose, as approved by the prescribed authority under Section 35(1)(iii).
• Payments made to an approved association or institution undertaking rural development programs, as approved under Section 35CCA.
• Payments made to an approved association or institution conducting training for implementing rural development programs.
• Payments made to a public sector company, local authority, or approved association or institution undertaking projects or schemes approved under Section 35AC.
• Payments made to a notified Rural Development Fund.
• Payments made to a notified Fund for Afforestation.
• Payments made to a notified National Poverty Eradication Fund.

It’s important to note that if a deduction has already been allowed under Section 80GGA, such expenses cannot be claimed as deductions under any other provision of the Income Tax Act.

What Is Adjusted Total Income?

Adjusted gross total income is calculated by deducting the following from the gross total income (which is the sum of income under all heads):

• The amount eligible for deduction under Sections 80C to 80U (excluding Section 80G).
• Exempt income.
• Long-term capital gains.
• Short-term capital gains under Section 111A.
• Income is referred to in Sections 115A, 115AB, 115AC, 115AD, and 115D.

FAQs

How to Apply for 80G Registration Online?

Depending on the jurisdiction, the process for applying for 80G registration online may vary. An application form must be completed and submitted with relevant documents to the appropriate authorities, such as the Income Tax Department.

Who can issue an 80G certificate?

Upon approval of an NGO's 80G registration application, an 80G certificate may only be issued by the Income Tax Department.

What is NGO Donation Tax Exemption Limit?

The NGO donation tax exemption limit varies by country and is typically determined by local tax laws. Donors may be eligible for tax deductions or exemptions up to a certain percentage of their income when contributing to registered non-profit organizations.

What are the new rules of 80G?

From 2021, donations made to certain NGOs will no longer qualify for tax deductions under section 80G. In addition, the government has tightened the rules for claiming tax deductions by NGOs.

How can I get an 80G Certificate Online?

To obtain an 80G certificate online, an NGO must first register with the appropriate authorities, such as the Income Tax Department. The 80G certificate can be downloaded from the online portal after the application has been approved.

What types of donations qualify for tax exemption under Section 80G?

Donations to institutions registered under Section 80G of the Income Tax Act, 1961, such as charitable institutions, educational institutions, religious trusts and certain social welfare organizations, qualify for tax exemptions.

How can individuals verify if an NGO is eligible for Section 80G tax benefits before making a donation?

Individuals can verify the eligibility of an NGO for Section 80G tax benefits by checking the NGO's registration and the specific projects or funds approved for tax benefits on the Central Board of Direct Taxes (CBDT) website.

Can donations made to any NGO automatically qualify for tax exemption under Section 80G?

No, only donations made to prescribed funds and institutions qualify for deductions under Section 80G, qualify for tax exemptions.

Are there different tax deduction rates for different types of NGOs under Section 80G?

Yes, the deduction rate varies depending on the type of NGO: 50% for donations to certain scientific research institutions, rural development funds, and public charitable institutions. 100% for donations to certain educational institutions and trusts established for charitable purposes.

How does one claim the tax deduction under Section 80G while filing the income tax return?

To claim tax deductions, taxpayers need to report the donation details such as the name of the donee, PAN of the donee, and amount contributed, in the relevant section of their income tax return.

What are the consequences or penalties if the information provided for claiming Section 80G deduction is inaccurate or false?

Providing inaccurate or false information for claiming a Section 80G deduction can lead to penalties and legal consequences for the taxpayer.

Can donations to foreign NGOs also qualify for tax benefits under Section 80G for Indian taxpayers?

Donations to foreign NGOs are generally not eligible for Section 80G benefits.

Can businesses or corporate entities also avail of Section 80G tax benefits for donations made to NGOs?

Yes, businesses, HUFs and corporate entities can claim Section 80G deductions for donations made to eligible NGOs under specific provisions.