What is Section 80G - List of Exemptions from Section 80G and 80GGA - Donations Eligible Under Section 80G

In the spirit of philanthropy, many of us consider the impact of charitable giving on financial planning, particularly in terms of potential tax implications, alongside its societal benefits. Recognizing the importance of fostering a culture of giving, the Indian government provides incentives under Section 80G of the Income Tax Act. This section aims to enhance the appeal of charitable giving by offering tax deductions for contributions to specific approved funds and institutions. Together with Section 80GGA, this provision serves as a cornerstone for individuals and organizations seeking to minimize tax obligations while making a positive societal impact.

Overview of Section 80G Tax Deductions

• Section 80G of the Income Tax Act incentivizes charitable contributions by providing tax deductions for donations to designated relief funds and charitable organizations. This incentive forms part of a broader tax planning strategy, allowing deductions beyond the well-known Section 80C and enabling significant tax savings.

New Developments in Tax Law

• Important changes were introduced in the 2023 Budget, notably the exclusion of certain fund donations from Section 80G deduction eligibility. Funds such as the Jawaharlal Nehru Memorial Fund, Indira Gandhi Memorial Trust, and the Rajiv Gandhi Foundation are no longer eligible.

Qualifications for Deduction Claims

• Section 80G deductions are available to various taxpayers, including individuals, businesses, Hindu Undivided Families (HUFs), Non-Resident Indians (NRIs), and others. However, not all donations qualify for these tax breaks; only contributions to prescribed funds and institutions are eligible, and the benefit is forfeited under the new tax regime (Section 115BAC).

Payment Methods for Approved Contributions

• Payment methods for Section 80G deduction eligibility include demand drafts, checks, and cash (for contributions under Rs. 2,000). Contributions above Rs. 2,000, whether monetary or in-kind, are ineligible for deductions to ensure transparency and traceability in charitable giving.

Claim Deductions: Process and Documentation

• Taxpayers seeking deductions under Section 80G must furnish comprehensive paperwork in their income tax returns, including the donee's name, PAN, address, and a detailed breakdown of the donation amount. Income Tax Return (ITR) forms facilitate this process by providing dedicated tables for classifying donations according to the eligible deduction percentage and any applicable qualifying limits.

Categories of Donations That Qualify

• The Act distinguishes between contributions eligible for a 50% deduction and those eligible for a 100% deduction, such as gifts to the Prime Minister's National Relief Fund and the National Defense Fund. Additionally, a 10% cap of adjusted gross total income applies to certain contributions supporting purposes like family planning, sports development, and other charitable endeavors.

Section 80G Deductions' Effect on Tax Obligations

• The tax benefit derived from Section 80G deductions varies depending on the taxpayer's profile and the applicable tax rate.

Essential Records

• Taxpayers must retain a properly stamped receipt from the donee organization containing crucial information such as the donor's name, donated amount, and PAN and registration number of the trust to support tax deduction claims.

Extension of Section 80GGA to Scientific Research and Rural Development

• In addition to charitable contributions, Section 80GGA allows deductions for contributions to rural development or scientific research, broadening the scope of social welfare support. However, this provision does not cover taxpayers with income or loss from business or professional activities under the new tax framework.

Taxpayers can leverage these measures to reduce tax obligations while enhancing societal welfare by adhering to qualifying conditions, payment schedules, and documentation requirements diligently.