written by Khatabook | October 27, 2021

Section 80g of income tax act

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Section 80G of the Indian Income Tax Act, 1961, allows a tax deduction on donations made to certain approved institutions and organisations. The amount of deduction that can be claimed under this section is either 100% or 50% of the donation amount, depending on the nature of the approved institution. The deduction is allowed from the total gross income of the taxpayer. The taxpayer must donate in cash or by cheque or draft to claim a determination under this section. The deduction is not available for donations made in kind. 

Did you know? During the fiscal year 2020–21, the veteran of Indian IT , Azim Premji, donated a whopping ₹9,713 crores annually, or ₹27 crores, every day.

Section 80G

Section 80G of the Income Tax Act of 1961 provides for deduction regarding donations made to certain approved funds, charitable institutions, and so on. The donations which qualify for deduction under this 3333 are known as qualifying donations. These are donations made to specific institutions or funds the Government approves. The purpose of these donations is to promote public welfare or promote education, science, or culture. The deduction amount is limited to 10% of the adjusted gross income of the individual.

The Donations Eligible Under Section 80G

Donating to a cause in which you really believe and making a difference is admirable. Given the noble nature of this act, the government fully supports charitable services. Donations to charity organisations are tax deductible under Section 80G of the Indian Income Tax Act.

Donating to the following charities can save you a significant share of income tax.

Section 80G of the Income Tax Act 1961 allows individuals to claim deductions for donations made to specified relief funds or charitable institutions. Donations made under this section are eligible for deductions on the total taxable income of the donor. 

Example: Mr. Kumar donated  10,000 to a charitable trust registered under Section 80G. This amount is eligible for deduction from Mr. Kumar's total taxable income. He can claim a deduction of up to 50% of the amount donated, subject to a maximum of 10,000. This means that Mr. Kumar can claim a deduction of 10,000 from the taxable income.

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  • National Defence Fund set up by the Central Government:

 The National Defence Fund (NDF) is a fund set up by the Central Government under section 80G of the Income Tax Act of 1961. The NDF is utilised for defence purposes and the welfare of the serving personnel and veterans of the armed forces.

  • Prime Minister’s National Relief Fund: 

The Prime Minister's National Relief Fund (PMNRF) is a public charitable trust which provides financial assistance to those in need of immediate relief. It also accepts voluntary contributions from individuals and organisations. The corpus of the PMNRF is invested in fixed-income securities such as government bonds and treasury bills. The PMNRF was established in 1948 to provide financial assistance to families of those who had lost their livelihoods due to the partition of India. Over the years, the PMNRF has helped many people in need, including victims of natural disasters such as floods, cyclones, and earthquakes. The PMNRF accepts donations from individuals, organisations, and corporations. These donations are eligible for deduction from taxable income under section 80G of the Income Tax Act.

  • National Foundation for Communal Harmony: 

The National Foundation for Communal Harmony (NFCH) is a statutory body of the Government of India, set up under the National Foundation for Communal Harmony Act, 2002. It is an autonomous body to promote communal harmony and strengthens national integration. The NFCH has been receiving donations from various individuals and organisations exempted from Income Tax under section 80G of the Income Tax Act of 1961. The donations received by the NFCH are utilised for its various programs and activities aimed at promoting communal harmony and national integration.

  • National Sports Fund: 

The National Sports Fund is a scheme set up by the Indian government to encourage donations towards promoting sports in the country. Under this scheme, donors can claim a deduction of up to 100% of the donation amount from their taxable income. The donation must be made in cash or kind and used to promote sports in India.

  • National Cultural Fund: 

The National Cultural Fund (NCF) was created in 1985 as a public trust to support Indian culture and heritage. The NCF is the primary funding source for protecting and promoting India's cultural heritage. The NCF provides grants to organisations and individuals working in the culture and heritage field for research, conservation, documentation, awareness-raising, and capacity-building activities. Donations to the National Cultural Fund are eligible for deduction under section 80G of the Income Tax Act.

  • Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund concerning any State or Union Territory:  

The Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund is a fund set up by the government of a state or union territory in India to provide financial assistance to people affected by natural disasters or other emergencies. Donations to the Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund are eligible for deduction under section 80G of the Income Tax Act.

  • Swachh Bharat Kosh: 

If you donate to the Swachh Bharat Kosh, you may be eligible for a deduction under section 80G of the Income Tax Act. Your donation must be made in cash or by cheque to a registered NGO or government body to be eligible. The deduction is available for donations up to 10% of your total income.

  • Jawaharlal Nehru Memorial Fund: 

The Jawaharlal Nehru Memorial Fund is eligible for a donation under section 80G of the Income Tax Act. The Fund was set up in memory of India's first Prime Minister, Jawaharlal Nehru, and provides financial assistance to needy students for their education. It also supports research and other academic activities in Indian Studies.

  • Prime Minister’s Drought Relief Fund:

If you have donated to the Prime Minister's Drought Relief Fund, you may be eligible for a tax deduction under section 80G of the Income Tax Act. To claim the deduction, you must submit a copy of your donation receipt to the relevant authorities.

  • Indira Gandhi Memorial Trust:

 The Indira Gandhi Memorial Trust is a registered charitable trust and is eligible for donations under section 80G of the Income Tax Act of 1961. The Trust was set up in memory of the late Prime Minister of India, Indira Gandhi, and provides financial assistance to needy and deserving students for their higher education.

  • Rajiv Gandhi Foundation:

The Rajiv Gandhi Foundation is a registered charitable organisation and is therefore eligible to receive donations under section 80G of the Income Tax Act. Donations to the Foundation are tax-deductible and can be made by individuals, companies, or trusts.

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Deductions Under Section 80GGA

80GGA of the Income Tax Act, 1961, allows for a deduction in respect of any income by way of royalty or fees for technical services received by a resident from a Government or an Indian concern in pursuance of an agreement made on or after the 1st day of April 1976, for the transfer of any industrial, commercial or scientific know-how. This deduction is, however, subject to the following conditions: 

  • the agreement should provide for the payment of such royalties or fees; 
  • the agreement should be approved by the Central Government, and 
  • the approval should be in force when the agreement is entered into.

The deduction under this section shall be available in respect of the income by way of royalty or fees for technical services received or receivable by the resident in pursuance of an agreement made on or after the 1st day of April 1976 for the transfer of any industrial, commercial or scientific know-how. The deduction under this section shall be available in respect of the income by way of fees for professional services received or receivable by the resident in pursuance of an agreement made on or after the 1st day of April 1976 for the provision of professional services.

Section 80G of the Income Tax Act of India enables Taxpayers to claim deductions on donations made to certain charitable organisations and funds. The deduction is available only when donations are made in cash or cheque and not in kind. To calculate the donations eligible under Section 80G, the following steps should be followed: 

Step 1: Calculate the total donations made to eligible organisations. This includes donations made in cash, cheques, demand drafts, and online transfers. 

Step 2: Check the list of eligible organisations and funds that have been approved by the Income Tax Department and are eligible for deductions under Section 80G. 

Step 3: Calculate the percentage of deduction available on the donations made. This can be found in the Income Tax Act. Generally, a 100% deduction is available on donations made to certain organisations, while a 50% deduction is available on donations made to certain other organisations. 

Step 4: Calculate the deductions eligible under Section 80G by multiplying the total donations made with the applicable deduction percentage. 

For example, Mr. Sharma made a donation of 10,000 to a charitable organisation eligible for 100% deduction under Section 80G of the Income Tax Act. In this case, the donation-eligible organisations are those registered under Section 80G of the Income Tax Act. So, Mr. Sharma can claim the full amount of 10,000 as a deduction from his taxable income. 

To calculate the deduction, first, calculate the Gross Total Income (GTI) of the donor. This is the total income (including salary, business income, and other incomes) before any deductions. 

Let us assume that Mr. Sharma's Gross Total Income is 5,00,000. Now, we can calculate the amount eligible for deduction under Section 80G as follows: Deduction Eligible = 10,000 x (5,00,000/100) Deduction Eligible = 50,000 Therefore, Mr. Sharma can claim a deduction of 50,000 from his taxable income under Section 80G.

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Donations Made Under Section 80GGA

Donations made under Section 80GGA are eligible for deduction from taxable income, and the deduction is available for donations made to scientific research or rural development. The primary purpose of introducing section 80GGA was to encourage donations for scientific research and rural development by providing tax incentives. 

The deduction is available for donations made to scientific research or rural development. The primary purpose of section 80GGA is to provide a deduction in respect of any sum paid by any person to the Central Government or any local authority or any approved research association or institution or university, other educational body, or any approved public sector undertaking for scientific research or rural development.

Donations Eligible Under Section 80GGA

  • Donation for Scientific Expansion

Any amount paid to a research association that conducts scientific research or an amount paid to a college, university, or other institution to be used for scientific research that has all been authorised by the prescribed authority under Section 35(1)(ii)  is considered to be a payment for scientific research.

  • Financial Aid for Research

Any amount provided to a research association that conducts social science or statistical research or any amount paid to a college, university, or other institution for use in the same manner, must all have the specified authority's approval in accordance with Section 35(1)(iii).

  • Sum Paid to Notified Rural Development Fund: 

The Sum paid to notified Rural Development Fund under Section 80GGA is an eligible deduction from the Income Tax payable by an assessee. The amount so deducted shall be credited to the Fund.

  • The Sum Paid to Notified Fund for Afforestation:

The Sum paid to the notified Fund for Afforestation under Section 80GGA is used for afforestation and reforestation activities in the country. The amount is transferred to the National Afforestation and Reforestation Fund (NARF), managed by the National Forest Authority (NFA).

  • The Sum Paid to Notify National Poverty Eradication Fund:

 The Sum paid to tell National Poverty Eradication Fund under Section 80GGA is an amount that is expressly set aside by the government to help alleviate poverty within the nation. This fund is typically used to provide financial assistance to those living below the poverty line and to help fund various poverty eradication programs. The amount of money set aside for this fund can vary from year to year, but it is typically a significant amount.

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  • Other Significant Donations

  • The amount awarded to a recognised group or organisation that implements a rural development program and is recognised under Section 35CCA
  • Amount paid to a recognised organisation or organisation that trains individuals to carry out rural development programs.
  • Amount paid to a public sector organisation, a local government, or a recognised group or institution that executes projects or programs authorised under Section 35AC.

Conclusion

When an employee makes a donation from their income and the amount is deducted from his or her salary by the employer, the deduction under section 80G can still be claimed. In such circumstances, even if the donation receipt is in the employer's name, the employer must give a certificate stating that the contribution was paid from the employee's salary account.

When paying an employee's salary, the employer must take TDS from the employee's salary and then pay the amount after deducting income tax. The amount deducted as TDS by the employer appears on Form 16.
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FAQs

Q: What are the conditions for claiming a deduction under 80G?

Ans:

  • The donation must be made to an approved institution or fund. 
  • The donation must be in the form of cash, cheque, or a draft.
  • The donation must be made on or before the due date of filing the income tax return.

Q: What is the maximum amount that can be deducted under 80G?

Ans:

The maximum deduction that can be claimed under 80G is 10% of the adjusted gross total income.

Q: What are the conditions for claiming a deduction under this section?

Ans:

The deduction under this section is available if the following conditions are satisfied:

 a) The assessee is an individual or an undivided Hindu family; 

b) The assessee has incurred expenditure on scientific research on in-house research and development facilities in India;

c) The assessee has not claimed any deduction in respect of such expenditure under any other provision of the Income-tax Act; and 

d) The expenditure is not like capital expenditure or personal expenses of the assessee.

Q: What are the eligible scientific research associations or institutions?

Ans:

The eligible scientific research associations or institutions must be: (i) approved by the prescribed authority; (ii) engaged in scientific research which is approved by the prescribed authority; and (iii) notified by the Board in the Official Gazette.

Q: What is the maximum deduction that can be claimed under 80GGA?

Ans:

The maximum deduction that can be claimed under 80GGA is 100% of the donations made.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.