Introduction

Income Tax Act, Section 80G deals with donations made towards charity, to provide tax incentives to individuals indulging in charitable activities.

This section offers tax deductions on donations made to certain funds or charities. An amount donated by an individual to an eligible charity can be claimed as a tax deduction while filing an income tax return.

If your NGO doesn’t have a 12A certificate, then it will be entitle to normal tax rates. So if you want your NGO to receive the benefit of income tax exemption, then you must get a 12A certificate for it.

Eligibility

All taxpayers (individuals/companies/Hindu Undivided Families) are eligible to make donations to charity under Section 80G and claim a deduction, subject to limits set down by the government.

NRIs donations are eligible to trusts or institutions and are also entitled to the benefits under Section 80G.

Certain Charitable Trusts, Religious Trusts, Societies and companies which come under Section 8 are eligible for 12A registration and it is not applicable for Private or Family Trust.

Donations Permitted

Individuals who wish to claim deductions under section 80G need to ensure that the organization they are donating to falls under the overview of this Act.

Only those donations are suitable for deductions which are registered under valid funds or charitable institutions. Trusts and charities need to be registered under Section 12A post which they qualify for the 80G certificate.

Individuals are advised to check the credentials of an organization before donating to it.

Exemptions

Not all donations made by an individual qualify for deductions under Section 80G.
Donations made to foreign trusts and political parties are not covered under the ambit of this section and individuals cannot claim tax deductions for such donations.

Deduction under Section 80G

Donations under Section 80G are eligible for tax deductions under certain conditions and can be broadly classified into four categories, as mentioned below.

  1. Donations with 100% deduction (Without any qualifying limit): Donations made under this category enjoy 100% tax deduction and are not subject to any qualification limit being met.
    • National Defence Fund donations
    • Prime Minister’s National Relief Fund
    • The National Foundation for Communal Harmony,
    • National/State Blood Transfusion Council.
  2. 50% Deduction Donations (Without any qualifying limit): Donations made towards these trusts qualify for 50% deduction.
    • Prime Minister’s Drought Relief Fund,
    • National Children’s Fund,
    • Indira Gandhi Memorial Fund, etc.
  3. Donations with 100% deduction (Subjected to 10% of adjusted gross total income): Donations made to local authorities or government to promote family planning and donations to Indian Olympic Association qualify for deductions under this category. In such cases, eligibility for deductions amount only to 10% of the donor’s Adjusted Gross Total Income.
  4. Donations with 50% deduction : Donations made to any local authority or the government which would then use it for any charitable purpose qualify for deductions under this category. In such cases, eligibility for deductions amount only to 10% of the donor’s Adjusted Gross Total Income. Donations which exceed this amount are capped at 10%.

The scope of Deduction

There are certain basic criteria which must be met for a donation to be valid under Section 80G. Some of the major points are mentioned below.

  • Donations made through other non-taxable income sources do not qualify for the deduction. So, donations should be paid through taxable income.
  • Only that kind of Donations is eligible which are paid either by cash or cheque,
  • Donations made in the form of clothes, food, medicines, etc. not eligible under Section 80G.
  • Only valid and registered trusts donation qualify for deductions.
  • Donation made to foreign institutions and political parties are exempt from deductions.

Documents Required to Claim Deduction under Section 80G

Individuals wishing to claim deduction under Section 80G need to have the following documents to support their claim.

1) Duly Stamped Receipt: It is mandatory to have a receipt issued by the trust/charity which receives a donation.

2) Form 58:  If the donor intends to claim 100% deduction on a donation than it is essential to file form 58, without which their donation will not be eligible for 100% deduction.

3) Registration Number of Trust:  Registration number by Income Tax Department is provided to each eligible trust and donors should ensure that their receipt contains this number.

The validity of registration number is necessary and on the date of a particular donation, failing which a donation might be ineligible for deductions.

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business ReturnBulk Return or Revised Return Filing.

How Legalraasta will help get 80G and 12A Certificate?

Our team of experts at legalraasta will liaison with concerned departments, to obtain the “80G-12A certificate” for you and your NGO. An 80g certificate will allow you as a donor to obtain income tax benefits and A 12A certificate will allow the NGO obtain to avail the benefit of income tax exemption.

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