AARTHI Registration No. : F.No.H.Qrs/III/69/06-07
Inspite of all the contributions made to social causes, there is a huge gap between the demand of money from the needy and the amount donated by philanthropists. This probably, is the reason why the Government has given tax benefits on donations. The amount donated towards charity attracts deduction under section 80G of the Income Tax Act, 1961. Section 80G has been in the law book since financial year 1967-68 and it seems it’s here to stay. Several deductions have been swept away but the tax sop for donations appears to have survived the axe.
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 assesses, 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.
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.
The Donation Receipt
In order to claim deduction, it is mandatory for the donor to furnish a proof of payment towards the eligible fund or institution. A stamped receipt is issued by the recipient trust in this regard, which must be attached by the assessed along with the income tax returns. The receipt must include the following details.
• Name and address of the trust
• The name of the donor
• The amount donated, mentioned in words and figures
• The registration number of the trust, as given by the income tax department under section 80G, along with its validity period.
Tax benefits cannot be claimed without the above mentioned details and document.
Donations deducted from Salary
Where employees have contributed towards eligible charitable causes from their salaries and the donation receipt is on the employer’s name, a deduction under section 80G could still be claimed. In such cases, the employer would need to issue a certificate mentioning that the contribution was made from the employee’s salary account.
There are many trusts in India engaged in charitable activities. In order to ensure that only contributions to genuine trusts entail a tax benefit, the government has brought in registration of trusts. Thus, before you donate, check to see, if the trust you are donating to is registered and has the tax exemption certificate, which is popularly known as the 80G certificate.
All donations to AARTHI are exempted. The Donors get a deduction of 50% from their taxable income under section 80 G (5) (v) & (VI) of the Income Tax Act 1961.
Non Resident Indians are not eligible for tax exemption as this benefit is valid only in INDIA.