Tax Deduction under Section 80G for Donations towards Social Causes
Have you donated money for charity, social or philanthropic purposes, or, have made contributions towards a National Relief Fund? If yes, then you could use these donations to reduce your tax outgo. The Income Tax Act encourages charitable deeds towards the poor and needy, and offers donors tax benefits under Section 80G. Read on to find out more about this section.
Understanding Section 80G
Section 80G offers a tax deduction for donations to certain prescribed funds and charitable institutions. Here are the details of the section.
This section is applicable to all assessees, who make an eligible donation, whether an individual, HUF, NRI or a company.
The extent of deduction is either 50% or 100% of the contribution, depending on the charitable institution donated to.
For certain funds, the aggregate deduction is limited to 10% of the “Adjusted Gross Total Income”. So, in such cases, even if you do make a donation larger than 10% of your Adjusted Gross Total Income, the donation amount eligible for claiming a deduction would be capped at 10% of the Adjusted Gross Total Income.
The Adjusted Gross Total in this case, is the gross total income minus long-term capital gain, short term capital gain and all deductions u/s 80CCC to 80U except any deduction under this section.
Scope of Deduction
- The donation may be paid either out of taxable or exempted income.
- Only donations made in cash or cheque are eligible for deductions. Donations made in kind, in the form of food, clothing, medicines etc are not eligible.
- Donations to foreign charitable trusts or to political parties are not eligible for any deduction.
- For donations made to Indian Olympic Association, any association notified u/s 10(23) for development of infrastructure for sports or games, or for sponsorship of sports or games, only a company is eligible for deduction.
- Donations made to not all charitable institutions qualify for a deduction. Here is a list of approved charitable institutions and funds that qualify for a deduction.
Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
- Donations to the Government or a local authority for the purpose of promoting family planning.
- Sums paid by a company to Indian Olympic Association
Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
- Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.