If you’re looking to reduce your taxable income while contributing to a good cause, Section 80G of the Income Tax Act is something you should know about. This section allows you to claim a tax deduction for donations made to certain charitable organizations. This is designed to encourage philanthropy and also support for social causes by providing tax benefits on donations.
What is Section 80G?
Under this section, taxpayers can claim deductions for donations made to eligible charities and non-profit organizations. These donations could be in the form of cash or even kind. Donations can be either to charitable organizations or to government funds. These deductions can be either 100% or 50% of the donated amount, depending on the organization’s status. The key benefit is that it encourages individuals and businesses to support social causes while receiving tax benefits.
Types of Donations Eligible for Deduction:
100% Deduction without Limit: Donations to institutions like the Prime Minister’s National Relief Fund, the National Defence Fund, and the Chief Minister’s Relief Fund fall into this category. You can claim the full amount of your donation as a deduction.
50% Deduction with Limit: Donations to other approved charities, like those registered under Section 12A or 80G, usually qualify for a 50% deduction. However, these deductions may be subject to a cap of 10% of your gross income.
How to Claim the Deduction?
You have to ensure that the charity you donate to is registered under Section 80G. Collect the donation receipt, which should have the organization’s registration number and the amount donated. When filing your income tax return, provide details of the donation and the receipt.
Example:
Imagine you are an individual taxpayer with a gross income of ₹10,00,000. You decide to donate ₹50,000 to a registered charity that qualifies for a 50% deduction under Section 80G. Therefore:
- Donation Amount: ₹50,000
- Eligible Deduction: 50% of ₹50,000 = ₹25,000
So, your taxable income is reduced by ₹25,000, making it ₹9,75,000. This reduction helps lower your tax liability.
Important Points to Remember:
- Receipts: Always obtain and preserve the donation receipt for claiming the deduction.
- Charity Status: Verify if the organization is eligible for deductions under Section 80G. Not all charities are eligible.
- Limits and Conditions: Be aware of the limits and conditions applicable to the type of donation.
Conclusion:
Section 80G is a valuable provision for taxpayers looking to contribute to society while enjoying tax benefits. By supporting eligible charitable organizations, you not only contribute to worthy causes but also reduce your taxable income. Just ensure that you keep proper documentation and verify the eligibility of the charity to make the most of this benefit.
– Ketaki Dandekar (Team Arthology)
Read more about Sec. 80G here – https://cleartax.in/s/80g