Section 80G Deduction: How to claim Section 80G deductions while filing ITR

Budget 2023 Update for deductions under Section 80G

As per the latest announcement in budget 2023, the donations made to the following funds will not be eligible for deductions under Section 80G:-

1. Jawaharlal Nehru Memorial Fund
2. Indira Gandhi Memorial Trust
3. Rajiv Gandhi Foundation The Finance bill page 47

What is Section 80G of the Income Tax Act?

Section 80G of the Income Tax Act provides for a deduction for donations made to certain charitable institutions or funds. The deduction is available to individuals as well as companies.

The deduction under section 80G can be claimed on the amount donated to eligible institutions or funds. The deduction can be claimed up to a maximum of 50% or 100% of the donated amount, depending on the institution or fund to which the donation has been made.

However, it is important to note that not all donations are eligible for deduction under section 80G. Only donations made to certain specified funds or institutions are eligible for deduction. It is, therefore, important to check whether the institution or fund to which the donation has been made is eligible for deduction under section 80G.

To claim the deduction under section 80G, the taxpayer must obtain a receipt or 80G certificate from the institution or fund to which the donation has been made.

The receipt should contain the name and address and PAN no.of the institution or fund, the amount donated, and the registration number, of the institution or fund under section 80G.

Who can claim a deduction under Section 80G?

Both company or non companycan claim a deduction under Section 80G of the Income Tax Act for donations made to eligible charitable institutions or funds.

What type of donations are eligible for the deduction under section 80G?

To claim a deduction under Section 80G, the donation must be in the form of money and not goods or services. The deduction can only be claimed for cash, cheque, or electronic transfer donations.

In addition, it is important to note that donations made in cash exceeding Rs. 2,000 will not be eligible for the deduction under Section 80G. Donors should ensure that they receive a receipt for the donation. The receipt should specify the amount donated, the name and address of the charitable institution or fund, and the registration number of the institution or fund under Section 80G.

Donors should also check the eligibility and maximum limit for deduction for each institution or fund before donating. It is important to note that the deduction limit and eligibility criteria can vary depending on the institution or fund to which the donation has been made.

How to claim the deduction under Section 80G while filing ITR?

Claiming Section 80G deduction at the time of filing ITR can be complex, let us make it simple for you by helping you in how it is calculated.

Tax calculation or tax liability is computed on the net taxable income of the taxpayer. The net taxable income is calculated after subtracting all the deductions that a taxpayer is eligible for from his/her gross total income. This means deduction under Section 80G will be deducted from the gross total income. The gross total income is the sum of income from all sources of income, such as salary, dividend income, capital gains, interest income, rental income etc.

Now the question is how much amount of deductions can be claimed under Section 80G deduction. This deduction ranges from 50% to 100% of the amount donated. Donations to certain institutions qualify for a full deduction of either 100% or 50%, without any qualifying limit. Also, in some cases, the deduction is limited to 10% of the taxpayer's adjusted gross total income.

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What is “Adjusted Gross Total Income” for tax exemption calculation under 80G?

Adjusted Gross Total Income in this regard means the sum total of your income under all heads less the following amounts:

• Amount deductible u/s 80C to 80U (but not Section 80G)
• Income on which income tax is not payable
• Long-term capital gains
• Short term capital gains under Section 111A
• Income referred to in Sections 115A, 115AB, 115AC, or 115AD.

What Documents are required to Claim tax deduction under Section 80G?

• Receipt: To claim deduction u/s 80G, you need a donation receipt to back your claim. The receipt should provide details like Name, Address, PAN, registration number of the trust & the name of the donor as well as the amount of donation and mode of payment.
• Registration No. of Trust on Receipt: Every trust registered with the IT department u/s 80G has a Registration Number. It is mandatory to mention that number on the receipt. This registration is valid for a limited period only. Hence, the receipt must mention the registration number and the validity period.
• Photocopy of 80G certificate: While getting a receipt, you should insist on a photocopy of the trust’s 80G registration certificate.

How much deduction is allowed under section 80G?

For individuals, the deduction under Section 80G can be claimed on the amount donated to eligible institutions or funds up to a maximum of 50% or 100% of the donated amount, depending on the institution or fund to which the donation has been made.

For companies, the deduction under Section 80G can be claimed on the amount donated to eligible institutions or funds up to a maximum of 50% or 100%of the donated amount. However, it is important to note that the limit on the deduction for companies is subject to certain conditions and restrictions.

Additionally, this deduction under Section 80G can only be claimed by taxpayers who have opted for the old tax regime.

How to calculate the amount of deduction under section 80G of the income tax?

Section 80G broadly categorizes donations under 2 categories. First, donations without any qualifying limit & second, donations with a qualifying limit.

These 2 categories further have sub-categories. You can refer to the diagram below for more clarity.

*Maximum limit is known as the qualifying amount.

For calculating the amount of deduction under 80 G, follow these steps:

• Check the category in which the fund/charitable institution falls (100% or 50% deduction with or without maximum/qualifying limit). We have given the complete list below for your reference.
• When the payment is made to the first category, then there is no need for further calculations; just claim 100% or 50% of the donation amount subject to taxable income.
• When payment is made to the second category, you need to find out the maximum/qualifying limit. The maximum/qualifying limit is 10% of the “adjusted gross total income.”
• Now use this formula to arrive at the amount of deduction =
  a) Gross Qualifying limit = All donations made to category 2
  b) Net Qualifying limit = This is 10% of the “adjusted gross total income”.
  c) Amount Deductible = 100%/50% of the donation amount subject to the net qualifying limit.

Example to explain the calculation of the amount of deduction under section 80G

Example: Mr. X, an individual, has income chargeable under the head salary of Rs.10,00,000 & a short-term capital gain of Rs.1,00,000. He makes the following investment & donations to save taxes.

Now, let’s see how Mr X can claim deductions of various investments & donations made by him.

First of all, we will calculate Adjusted GTI as below:

As a next step we will calculate the net qualifying Limit (i.e. 10% of INR 8,50,000) which comes to 85,000.

Further, we will classify the donations into 2 categories as below:-

Without Qualifying Limit

Section 80G Deduction: Eligible List of funds/Charitable Institutions for donations

The prescribed funds and charitable institutions are divided into two categories:

Category 1: Donations where the deduction is available without any qualifying limit. This is further sub-categorized in funds with

• :- 100% deduction without qualifying limit and
• :- 50% deduction without qualifying limit

Category 2: Donations where deduction available is subject to qualifying limit. This is further sub-categorized into funds with

• :- 100% deduction subject to qualifying limit and
• :- 50% deduction subject to qualifying limit

Category 1.1: Funds that give 100% deduction and without any qualifying limit

Category 1.2: Funds that give 50% deduction without any qualifying limit.

Category 2.1 : Funds that give 100% deduction and are subject to qualifying/maximum limit (ceiling of 10% of adjusted gross total income)

Category 2.2: Funds that give 50% deduction and are subject to qualifying limit (ceiling of 10% of adjusted gross total income)

What points should I keep in mind for claiming this deduction?

Some points to be kept in mind while claiming deduction u/s 80G are as follows:

• If you make any donation to a foreign trust then no deduction u/s 80G will be allowed.
• Any donation made to political parties, like souvenirs, pamphlets, etc, will not be eligible for deduction under this section. Although contributions (other than cash) to political parties are eligible for deduction u/s 80GGB & 80GGC. For more detail, refer to our guide.
• All donations do not enjoy deduction u/s 80G. Donations made to only specified funds are eligible, the names of which are enlisted above.
• A taxpayer can claim a deduction in respect of donations to certain funds/ institutions under section 80G. For claiming a deduction, a donor should not forget to take the donation receipt containing the name, PAN, address, and registration number of the donee, along with the donor's name, amount donated, and mode of payment. As the details of the donation would be required to be entered while filing ITR. Donations should be paid by any mode other than cash in case the amount of donation exceeds Rs.2000/-