Tax Deductions on Donations Under Sections 80G and 80GGA

Tax-saving opportunities are a crucial aspect of financial planning, especially in India, where various sections of the Income Tax Act provide avenues for reducing taxable income. Among these, Section 80G & 80GGA deductions stand out for promoting social welfare and encouraging contributions to approved charitable organisations, scientific research, and rural development initiatives. By understanding these provisions, taxpayers can not only contribute to nation-building but also optimise their tax liabilities effectively.

What is Section 80G?

Section 80G of the Income Tax Act allows taxpayers to claim deductions on donations made to specified charitable organisations. This provision aims to incentivise philanthropy and support institutions working towards social, educational, and humanitarian causes.

The deduction under Section 80G is available to all taxpayers, including individuals, Hindu Undivided Families (HUFs), companies, and firms. However, the eligibility and extent of deduction depend on the type of organisation and the payment mode.

Mode of payment under Section 80G

To claim deductions under Section 80G, donations must be made via non-cash modes such as cheque, demand draft, or online transfer. Cash donations exceeding Rs. 2,000 are not eligible for deductions, ensuring transparency and traceability in charitable contributions.

List of donations eligible for 100% deduction without qualifying limit

Certain donations qualify for a full deduction without any upper limit on the taxpayer’s income. These include contributions to:

• National Defence Fund set up by the Central Government.
• Prime Minister’s National Relief Fund.
• National Foundation for Communal Harmony.
• Clean Ganga Fund.

List of donations eligible for 50% deduction without qualifying limit

Donations eligible for a 50% deduction without a qualifying limit include contributions to:

• Jawaharlal Nehru Memorial Fund.
• Prime Minister’s Drought Relief Fund.
• Indira Gandhi Memorial Trust.

List of donations eligible for 100% deduction subject to 10% of adjusted gross total income

Certain donations qualify for a full deduction, but only up to 10% of the taxpayer’s adjusted gross total income. Examples include contributions to:

• Local authorities for promoting family planning.
• Approved institutions engaged in the development of sports and infrastructure.

List of donations eligible for 50% deduction subject to 10% of adjusted gross total income

Donations eligible for a 50% deduction, subject to 10% of adjusted gross total income, include contributions to:

• Local authorities for activities other than family planning.
• Charitable organisations not specified under the 100% deduction list.

What is adjusted total income?

Adjusted total income refers to the gross total income of a taxpayer, reduced by deductions under Sections 80C to 80U (excluding Section 80G) and exempt income. This calculation ensures that deductions under Section 80G are applied to a fair and reasonable portion of taxable income.

How to calculate the deduction under Section 80G?

To compute the deduction under Section 80G:

1. Determine the eligible donation amount.
2. Categorise the donation based on its deduction percentage (100% or 50%).
3. Apply any qualifying limits (if applicable) to adjusted gross total income.

For example, if your adjusted gross total income is Rs. 10 lakhs and you donate Rs. 1 lakh to an organisation eligible for 50% deduction subject to 10% of adjusted income, your deduction will be Rs. 50,000.

How does deduction under Section 80G benefit different types of taxpayers?

Section 80G deductions benefit taxpayers by reducing their taxable income, thereby lowering the overall tax liability. For high-income earners, this can result in significant savings, while also contributing to societal welfare.

Details and documents required to claim deduction under Section 80G

To claim deductions under Section 80G, taxpayers must provide:

• Donation receipt issued by the charitable organisation, containing its name, PAN, and registration number.
• Certificate of registration of the organisation under Section 80G.
• Proof of payment such as bank statements or transaction details.

Proper documentation ensures smooth processing of claims during tax filing.

Mode of payment for claiming deduction under Section 80GGA

Section 80GGA provides deductions for donations made towards scientific research or rural development. Similar to Section 80G, payments under Section 80GGA must be made via non-cash modes such as cheque, demand draft, or electronic transfer. Cash donations exceeding Rs. 10,000 are not eligible for deductions.

List of donations eligible under Section 80GGA

Eligible donations under Section 80GGA include contributions to:

• Approved institutions conducting scientific research.
• Organisations involved in rural development projects.
• Funds set up for afforestation or wildlife conservation.

These donations are eligible for a 100% deduction, making Section 80GGA an attractive option for taxpayers wishing to support research and development initiatives.

Sections 80G and 80GGA of the Income Tax Act offer taxpayers a unique opportunity to contribute to the betterment of society while enjoying tax benefits. By understanding the eligibility criteria, payment modes, and deduction limits, taxpayers can make informed decisions about their charitable contributions and optimise their tax planning strategies.