Save Tax Through Deduction On Donation

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  • 06 Feb 2023

The government encourages people to donate to charities by providing deduction under Section 80G of the Income Tax Act. But do make sure that you are contributing to entities recognized by the government of India.

Donations made via either cash or cheque can be claimed as deductions. From the assessment year 2018-19, the cap for deduction on donations made in cash has been brought down to Rs. 2,000 from Rs. 10,000 earlier. This has been done to curb misuse of the provision by providing fake receipts.

It is important to remember that donations made in kind — clothes, food ration, medicines, utensils, etc. — are not eligible for deductions.

Broadly speaking, the government of India has divided charitable funds and entities into various categories under Section 80G of the Income Tax Act.

Some funds and entities allow for a 100% deduction while others allow for a 50% deduction. Similarly, some funds and entities do not have a cap on the amount that can be claimed as deduction, while others do. The Income Tax Department releases the list of funds and entities periodically with the specified limits and deduction allowed.

Deduction On Donation With No Upper Limit:

Donations made to the funds and entities listed below are exempt from income tax without an upper limit.

  • Prime Minister’s National Relief Fund
  • National Defence Fund
  • Prime Minister’s Armenia Earthquake Relief Fund
  • The Africa (Public Contribution - India) Fund
  • The National Foundation for Communal Harmony
  • Approved university or educational institution of national eminence
  • The Chief Minister’s Earthquake Relief Fund, Maharashtra
  • Donations made to Zila Saksharta Samitis
  • The National Blood Transfusion Council or a State Blood Transfusion Council
  • The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
  • National Illness Assistance Fund
  • Chief Minister's or Lt. Governor's Relief Fund
  • National Sports Fund
  • National Cultural Fund
  • Central Govt.'s Fund for Technology Development & Application
  • National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
  • Andhra Pradesh Chief Minister's Cyclone Relied Fund
  • Jawaharlal Nehru Memorial Fund
  • Prime Minister’s Drought Relief Fund
  • National Children’s Fund
  • Indira Gandhi Memorial Trust
  • Rajiv Gandhi Foundation

Deduction On Donation With An Upper Limit:

For other entities, an upper limit is imposed on the total deduction amount. This upper limit is 10% of the taxpayer’s gross adjusted income.

Gross adjusted income is equal to gross total income minus all exempted incomes, long-term capital gains and all deductions under Section 80C to 80U except for deduction under section 80G.

Again, in this list, some entities are eligible for 100% deduction while others have a 50% deduction. Please refer to the Income Tax website for the complete list.

You need to submit a receipt issued by the donee entity as proof of donation made. You must ensure that the receipt shows the name, address, Pan details and the registration number of the donee, along with your name and amount donated.

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