The need of charity in a resource crunched country like India cannot be undermined. Therefore, in order to encourage charity, the government has made a provision for deduction under 80G. At the same time, in order to prevent misuse of the tax benefit, the government only gives out tax soap for charities that meet a certain criteria. The amount donated can be subjected to either full or partial exemption.
Any taxpayer – be it Individual or Company, can claim for deduction under 80G. It is important to note that only monetary donations are exempted. Hence, value of any other donation – like blanket, food supply in natural calamity, is not exempt.
Also, only donations made to institutions that have valid 80G certificates are considered for exemption, so you must ensure that the charity or trust which you are donating to, has a valid 80G certificate. With effect from 1st October 2009, it is not important for charity institutions to apply for renewal of 80G certificate, so any certificate valid till 1.10.2009 is valid unless specifically withdrawn.
Maximum amount deduction under 80G – It is capped to 10% adjusted gross total income, however there are certain institutions to which the donations are fully exempt or are eligible for 50% of the total benefits, irrespective of your adjusted gross total income.
Deductions under 80G – Scenarios
A. Donations to Institutions without Any Qualifying Limit
Suppose your adjusted gross total income is 10 Lakhs, and you donate 3 lakh to various institutions where donations are exempted without any qualifying limits, then here is how it works:
- For all donations made to institutions with 100% exemption (Prime minister’s National relief fund), total donation of Rs 3 Lakhs shall be exempted from taxation.
- For donations made to institutions with 50% exemption (Indira Gandhi Memorial Trust), 50% of the donation amount i.e. Rs 1,50,000 shall be exempt.
B. Donations to Institutions With Qualifying Limit
Now suppose, with the same adjusted gross total income (Rs 10 lakhs) you donate Rs 1,50,000 to various institutions where donations are exempt subject to qualifying limits (which is 10% of your gross total income)
- For donations made to institutions with 100% exemption (Charity institutions like CRY), Rs 1 lakh shall be exempt (As only a maximum exemption of 10% of your total income is allowed)
- For donations made to institutions with 50% exemption (Charity institutions Oxfam), Rs 75,000 shall be exempted from taxation (Rs 10 lakh minus 75,000 – 50% of Rs 1,50,000)
The Process to claim tax benefits under 80g: In order to claim benefits, you – the donor, would need to furnish a proof of payment. A trust, charity or institution receiving your donation will issue you a stamped receipt, and you would need to produce the receipt while filing your returns.
Charitable organizations that take online payments like CRY and Oxfam India, they will mail you the receipt once the donation is made. The receipt should contain your name, name of the charity, amount donated and the registration number of the charity/trust. You can simply make a donation to some of these charities while e-filing your IT return.
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You can claim deduction under 80G through employer only for the donations made to institutions or charity that don’t have any qualifying limits. Therefore, if you donate Rs 10,000 to Prime Minister’s relief refund, you can claim tax benefits for the same through your employer. But, if you donate the same amount to a charitable institution like CRY or Oxfam India, then you would need to claim the tax benefit at the time of filing your tax returns.
You also can claim tax benefits for any donation that you make through your employer. Such donations will be a part of form 16, through which you can file your tax returns and claim tax benefits.