Budget 2021: What is 80G of Income Tax Act?

Some entities are not notified for donation purpose by the income tax department, so, be careful about which entity you donate to.

January 23, 2021 / 03:32 PM IST

Using the deductions available under Section 80G, taxpayers can save tax while doing some good work. Section 80G of the I-T Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income.

Some entities are not notified for donation purpose by the income tax department, so, be careful about which entity you donate to as you will not be able to claim any deduction on donations to unnotified entities. Also, even on donations to notified entities, you can claim 100 percent deduction only on donations to a specified list.

Under section 80G, deduction is not restricted to any specific category of persons/ assessees. This deduction can be availed by any assessee who makes a donation to the notified institutions and the relief funds set up by the government.

Under section 80G, one must remember that any donation made to foreign trusts and political parties do not qualify for deduction. Under the section 80GGC of the I-T Act, any donation to political parties made by an Individual can be claimed as a deduction.

A deduction can be claimed under section 80G only when the contribution is made to specified funds and institutions either via cheque or cash. A person can avail a maximum deduction of Rs 2,000 if the donation is made in cash effective from the assessment year 2018-19. Under this section, any donation made in kind such as in the form of clothes, food rations etc. cannot be claimed as deductions.

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You can claim either 100 percent or 50 percent of the amount donated as a deduction subject to 'With' or 'Without' the upper limit.

One must provide the standard receipt issued by the trust/donee entity as proof of the donation made to avail the deduction. One must make sure that the receipt contains the name, address, Pan Number of the trust, the registration number of the trust, name of the donor and amount donated, written in words and figures while taking the receipt, this will be required at teh time of filing income tax returns.
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