Section 80G of the Income Tax: A Comprehensive Guide to Tax Deductions for Charitable Donations

Table of Contents:

I. Introduction

II. What is Section 80G of the Income Tax Act?

III. Types of Claims in Section 80G

A. 100% Tax Deduction without Qualifying Limits

B. 50% Tax Deduction with Qualifying Limits

IV. Qualifying Limit for Tax Deductions under Section 80G

A. Calculation of Qualifying Limit

B. Example of Qualifying Limit for Individuals

C. Example of Qualifying Limit for Companies

D. Importance of Staying Within Qualifying Limit

V. Types of Charitable Organizations Eligible for Tax Deductions under Section 80G

A. Section 12A of the Income Tax Act

B. Section 80G(5) of the Income Tax Act

“You may never know what results come of your actions. But if you do nothing, there will be no result.”

• Mahatma Gandhiji

I. Introduction

Charitable giving not only supports social causes but also offers tax benefits. Under the Indian Income Tax Act, Section 80G encourages individuals and organizations to contribute to recognized charitable institutions by offering tax deductions. This guide explores the scope, eligibility, and calculation mechanisms involved in claiming deductions under Section 80G.

II. What is Section 80G of the Income Tax Act?

Section 80G provides income tax deductions for donations made to certain funds, charitable institutions, NGOs, and relief funds. The extent of deduction—either 50% or 100%—depends on the recipient organization and whether the donation falls within specified qualifying limits. It applies to all taxpayers, including individuals, companies, firms, and Hindu Undivided Families (HUFs), provided they have taxable income.

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III. Types of Claims in Section 80G

Donations under Section 80G are classified into four broad categories based on the percentage of deduction allowed and whether qualifying limits apply.

A. 100% Tax Deduction without Qualifying Limits

Donations to certain national relief funds and institutions qualify for 100% deduction without any upper limit. Examples include:

• Prime Minister’s National Relief Fund

• National Defence Fund

• Chief Minister’s Relief Fund (notified by central government)

• National/State Blood Transfusion Councils

B. 50% Tax Deduction with Qualifying Limits

Many charitable trusts and institutions fall under this category, where the donor can claim 50% of the donated amount as a deduction, subject to a qualifying limit based on income. Examples include:

• Approved NGOs involved in social, environmental, or educational services

• Local authorities engaged in promoting family planning

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IV. Qualifying Limit for Tax Deductions under Section 80G

A. Calculation of Qualifying Limit

The qualifying limit is calculated as 10% of the donor’s Gross Total Income (GTI) after excluding certain exemptions and deductions under other sections (like 80C to 80U).

If the total donation exceeds this 10% limit, the deduction is restricted only to that threshold, and any excess is not eligible for tax relief.

B. Example of Qualifying Limit for Individuals

Mr. Kumar has a Gross Total Income of ₹8,00,000 and makes a donation of ₹1,00,000 to an eligible NGO qualifying for 50% deduction with a qualifying limit.

• 10% of GTI = ₹80,000

• Eligible deduction = 50% of ₹80,000 = ₹40,000

C. Example of Qualifying Limit for Companies

XYZ Pvt Ltd earns ₹25,00,000 as GTI and donates ₹5,00,000 to an approved institution (50% deduction with limit).

• 10% of GTI = ₹2,50,000

• Eligible deduction = 50% of ₹2,50,000 = ₹1,25,000

D. Importance of Staying Within Qualifying Limit

Donors must be cautious not to exceed the 10% limit when donating to organizations under the “with limit” category. Planning donations strategically ensures maximum tax benefit. Amounts donated beyond the cap will not fetch any additional tax relief.

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V. Types of Charitable Organizations Eligible for Tax Deductions under Section 80G

A. Section 12A of the Income Tax Act

To be eligible under Section 80G, the charitable institution must be registered under Section 12A, which validates its non-profit nature and its exemption from income tax.

B. Section 80G(5) of the Income Tax Act

Only those organizations approved under Section 80G(5) are eligible to issue 80G receipts. This approval certifies that the institution meets criteria like maintaining proper books, using income exclusively for charitable purposes, and not working for the benefit of a particular religious community or caste.

C. Importance of Verifying 80G Certificate

Before donating, individuals and organizations should verify the 80G registration number and validity of the certificate issued by the Income Tax Department. This ensures the donation qualifies for tax deduction and helps avoid compliance issues during tax filing.