In India, at the end of every financial year, around 8.45 crore people pay income tax as a percentage of annual income. And, every year, more than half of people look for various decent ways to save their taxes. One of those ways is doing charity or donation. This is where section 80G of the Income Tax act comes into the picture.
In India, under section 80G, there are several ways to get tax exemption if you donate something. If you donate land to a government body and get the certificate, donate securities to a charitable organisation authorized by the central or state government, etc., are a few of the many ways to get tax exemption in India.
We know donating makes you feel good! But does it sound better if it could help you save your tax? Yes, you read that right! Section 80G of the Income Tax Act is a special provision wherein taxpayers can be exempt from paying taxes by donating funds to the organisations specified under the act.
Let’s get into this concept more deeply!
What is Section 80G of the Income Tax Act?
If you are a taxpayer looking for an exemption from tax under Section 80G. In that case, you can generously donate funds to NGOs like Stritva or any Governmental organisation to receive a 50% exemption from paying taxes. Conclusively, section 80G will provide tax incentives to an individual or a company indulging in philanthropic services. Taxers can claim tax deductions through donations while filing an income tax return.
Henceforth, put an end to your long-time contemplation of contributing to a good cause, as it also comes with tax exemption.
How to be Exempt from Tax Under Section 80G?
An Indian taxpayer is eligible for tax exemption under section 80G of the Income Tax Act if the donation is made to a specified charity or religious organisation. Whether you are an individual or an organisation, you can claim a deduction by submitting the following documents-
- Name and address of the charitable trust
- Name of the donor
- The donated amount, both in figures and words
- The Registration Number of the charitable trust along with its validity.
Section 80G Deduction
There are certain conditions under which the process of deduction under Section 80G is processed. The 80G deduction limit is broadly classified under 4 categories.
Without Any Maximum Limit
1- 100% Deduction
There will be a 100% exemption of tax under this category. National Defence Fund, Prime Minister’s National Relief Fund, The National Foundation for Communal Harmony, National/State Blood Transfusion Council, etc. qualify for this particular category.
2- 50% Deduction
Prime Minister’s Drought Relief Fund, National Children’s Fund, Indira Gandhi Memorial Fund, etc qualify under this category. There will be a 50% deduction without any qualifying limit.
Subject to Maximum Limit of 10% of Adjusted Gross Total Income
3- 100% Deduction
Under this category, donations are processed for local authorities or the government to promote family planning and donations to the Indian Olympic Association. However, only 10% of the Adjusted Gross Total Income of the donor will be eligible for deductions.
4- 50% Deduction
Donations under 80G should be made to local authority or government which is used for any charitable purposes. Only 10% of the Adjusted Gross Income becomes eligible for deductions. However, an amount exceeding this limit will be capped at 10%.
Documents Required to Claim an Exemption under Section 80G
Taxpayers should have all the following documents to claim deductions under Section 80G.
- The receipt of donations.
- Form 58 should be submitted if the donations fall under the 100% category
- Photocopies of 80G Certificate
- Registration number of the charitable trust.
Payment Mode for donations under Section 80G
An amount of more than Rs 2000 should be processed in the form of a cheque, digital payment, or demand draft. An amount up to Rs 2000 can be donated in the form of cash.
