Remember the famous saying by Anne Frank, “No one has ever become poor by giving”? The same can be said of taxpayers who can claim tax benefits on donations to charitable organizations under Section 80G of the Income Tax Act, 1961. However, taxpayers must consider certain essential points while claiming this deduction in their income tax returns (ITRs).
Taxpayers can avail of tax-saving benefits by donating money to eligible charitable institutions under Section 80G of the Act. By making donations to these approved institutions and organizations, taxpayers can claim deductions ranging from 50% to 100% of the donated amount. However, there are specific limits and conditions that must be met in order to qualify for these deductions.
You can claim a deduction from Gross Total Income
To arrive at your tax liability, you must assess your net taxable income. This you may calculate by excluding all the deductions from the gross total income. These deductions include those under Section 80G too. Also, taxpayers unable to show or file their gross total income cannot claim a deduction under this section.
How much can you claim under Section 80G?
Taxpayers have the opportunity to claim deductions on their donations, which can range from 50% to 100% of the donated amount. Certain institutions qualify for a full deduction of either 100% or 50%, with no qualifying limit. However, there are cases where the deduction is restricted to 10% of the taxpayer's adjusted gross total income too.
You may not qualify for all deductions available under this section. To start with, there are four categories of deductions that you may deduct from your gross total income. Identify the category of the fund or charitable institution you are eligible for to check the allowed deduction percentage, which can be either 100% or 50%. Also, you must check if there are any maximum or qualifying limits on the deduction amount, apart from the permissible deduction percentage.
You will find four tables under Section 80G in the ITR form pursuant to the four categories of donations made and listed for the deduction.
- Table A – Taxpayers reporting donations eligible for a 100 per cent deduction sans any qualifying limit.
- Table B – Taxpayers can list down the donations eligible for a 50 per cent deduction without any qualifying limit.
- Table C – Taxpayers can note down the donations that qualify for a 100 per cent deduction subject to a given qualifying limit.
- Table D – Taxpayers can note down the donations that qualify for a 50 per cent deduction subject to a given qualifying limit.
Note that the deduction under Section 80G is restricted to the gross total income earned by the taxpayer. If the amount is zero or negative, you cannot claim any deduction under this section. This means that Section 80G deductions cannot generate negative figures or losses that can be carried forward to subsequent years.
Nature of donations eligible
To qualify for a deduction under Section 80G, it is necessary for the donation to be made in the form of monetary funds. Donations made in kind, such as goods or services, are not eligible for this deduction. The deduction can only be claimed for donations made via cash, cheque, or electronic transfer. It is crucial to note that cash donations exceeding ₹2,000 will not be eligible for the deduction under Section 80G.
How can you claim the deduction?
Ensure that you have the donation receipt and the certificate in Form 10BE to claim a deduction under Section 80G of the Income Tax Act, 1961. These documents will be required during the process of filing your ITR. Make sure to have the necessary details mentioned in the donation receipt and donation certificate on hand while filing your ITR.
To obtain Form 10BE, you can request it from the institution or non-governmental organization (NGO) to which you made the donation. This certificate acts as tangible evidence to substantiate your claim for the deduction. It is crucial to verify that the actual donation amount aligns with the information stated in Form 10BE before submitting your tax return. If there are any discrepancies, it is advisable to request a revised and updated Form 10BE certificate from the receiving institution.
Form 10BE should be downloaded from the income tax portal and should not be a handwritten letter by the institution or NGO. The donation certificate will have the Income Tax Department logo and watermark, which serves as an indication that Form 10BE is downloaded from the income tax department's e-filing portal. This ensures the authenticity and validity of the form for claiming the deduction.
Documents required for submission
While listing the donations eligible for deduction in your ITR, taxpayers must submit the following details too.
- Name and address of the organization receiving the donation
- PAN of the donee
- Total donation amount including the portions paid in cash and cheque
- The amount of donation eligible for deduction.
Apart, taxpayers must also share the Donation Reference Number for donations given to organizations allowing scope for a 50 per cent deduction, given the qualifying limit. This number is an important detail that should be obtained from the donation certificate issued in Form 10BE by the donee institution. It is essential to mention this reference number in your ITR while filing your taxes.
The Donation Reference Number helps in accurately linking and verifying the donation details mentioned in the ITR with the information provided by the donee institution, ensuring transparency and compliance with the tax regulations.