To promote charity towards the poor class of the society, the government of India is encouraging people to give donations which can also be claimed as a deduction in income tax.
There are many government organizations and NGO’s which work for the poor and one can make donations to them to ensure that the funds are used for noble purposes.
As per the provisions of the Income Tax Act, one can avail the benefit of deduction in case he makes a donation for some specified purposes.
Section 80 G of the Income Tax Act, 1961:
According to section 80G of the Income Tax Act, 1961, deduction is available to any assessee, whether he is an individual, a company, a firm or some other person, for giving donation to some specified funds and charitable institutions. The amount which has been donated is allowed as deduction from the taxable income of the assessee during filing of income tax return and accordingly tax is calculated.
Essential conditions for availing section 80G:
The donation should be in the form of money. The donation should not be in any other form. The provisions of section 80G of the Act contemplate donations only in the form of money and not donations in kind. The assessee has to file a proof of his payment. A stamped receipt issued by the recipient containing all details should be furnished by the taxpayer at the time of filing his return.
Benefit of section 80G is available when the fund or institution to which such donation is made satisfies the conditions enumerated in clause (5) of section 80G.
Maximum deduction allowed under Section 80G:
In some cases there is no upper limit for the deduction under section 80G which can be claimed. But in some cases deduction under section 80G is limited to 10% of the adjusted gross total income of the assessee.
The balance income after deductions would be taxable as per normal prevailing income tax rates applicable to the taxpayer.
Deductions where there is no maximum limit:
The following donations are allowed as total deduction under section 80G –
1. National Defence Fund under the Central Govt.;
2. Prime Minister’s Relief Fund;
3. Prime Minister’s Earthquake Relief Fund;
4. Educational Institution of National eminence under the prescribed authority;
5. Chief Minister’s Earthquake Relief Fund;
6. Any Fund under the State Govt. of Gujarat, for giving relief to the victims of any natural disaster such as earthquake;
7. National Sports Fund;
8. Fund for the development of technology.
When can one claim deduction under Section 80G?
Deductions for donations under section 80G of the Income Tax Act can be claimed during filing of income tax returns.