How do I claim deductions for donations under Section 80G?

Giving back to society through charitable donations is a noble act that brings immense personal satisfaction. It’s a way to support causes you believe in and contribute to the greater good. But did you know that your generosity can also offer you a financial advantage? The Indian Income Tax Act encourages this philanthropic spirit through specific tax benefits, primarily under Section 80G. This article is your comprehensive guide on how to claim deductions for donations under Section 80G, breaking down the entire process from understanding eligibility to the final step of filing your Income Tax Return (ITR). Whether you are a salaried professional looking to reduce your tax liability or a small business owner committed to corporate social responsibility, this guide will provide clear, actionable steps to ensure you get the tax benefits you deserve for your contributions.

What is Section 80G of the Income Tax Act?

Understanding the foundation of this tax benefit is the first step toward utilizing it effectively. Section 80G is a specific provision within the Income Tax Act, 1961, designed to motivate taxpayers to donate to charitable causes by offering them a financial incentive in the form of a tax deduction. It’s a win-win situation where your contribution helps a charitable organization continue its work, and in return, you lower your taxable income, thereby reducing your overall tax outgo.

The Core Purpose of Section 80G

The primary objective of Section 80G is to allow taxpayers to reduce their tax liability by deducting the amount of their donations made to certain government-approved funds and charitable institutions from their Gross Total Income. When you make an eligible donation, you can claim either 50% or 100% of the donated amount as a deduction, depending on the nature of the recipient institution. This provision provides significant 80G relief for donors in India, acting as a powerful encouragement for individuals and businesses to contribute to a wide range of social, scientific, and cultural causes that benefit the nation as a whole. It essentially makes the act of giving more affordable and rewarding from a financial perspective.

Who Can Claim This Deduction?

One of the best aspects of Section 80G is its universal applicability. The deduction is available to all types of taxpayers, regardless of their status or source of income. This includes:

• Individuals (both salaried and self-employed/business owners)
• Hindu Undivided Families (HUFs)
• Companies
• Firms
• Any other person

It is important to note that this tax benefit is not restricted to Indian residents alone. Non-Resident Indians (NRIs) who have taxable income in India can also make donations to eligible institutions and claim deductions under Section 80G, provided they follow the prescribed procedure.

Understanding the Types of Donations and Deduction Limits

A common misconception is that all donations automatically qualify for a 100% tax deduction. However, the reality is more nuanced. The amount of deduction you can claim under Section 80G depends entirely on the category of the fund or institution to which you have donated. The Income Tax Act has classified these institutions into different categories, each with its own specific deduction limit. Understanding these categories is crucial to accurately calculate your Section 80G eligible donations in India and claim the correct tax benefit.

Category 1: Donations Eligible for 100% Deduction (Without Any Qualifying Limit)

This category includes donations made to funds of the highest national importance. When you donate to these specified funds, you can claim the full amount you donated as a deduction from your taxable income, without any upper ceiling or complex calculations. These are considered the most direct and impactful contributions from a tax-saving perspective.

Some prominent examples include:

• National Defence Fund set up by the Central Government
• Prime Minister’s National Relief Fund (PMNRF)
• National Foundation for Communal Harmony
• An approved university/educational institution of National eminence
• Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund for any State or Union Territory
• Clean Ganga Fund
• Swachh Bharat Kosh
• PM CARES Fund

For a comprehensive and updated list of all eligible funds in this category, you can refer to the official Income Tax India Website.

Category 2: Donations Eligible for 50% Deduction (Without Any Qualifying Limit)

In this category, you can claim a deduction of 50% of the amount you donated, again without being subject to any qualifying limit or percentage of your income. While the deduction is halved compared to the first category, these donations still offer a significant tax benefit for supporting specified trusts and funds that have historical and national significance.

Examples of funds falling under this category include:

• Jawaharlal Nehru Memorial Fund
• Prime Minister’s Drought Relief Fund
• Indira Gandhi Memorial Trust
• Rajiv Gandhi Foundation

Category 3: Donations Eligible for 100% or 50% Deduction (Subject to a Qualifying Limit)

This is the broadest and most common category, covering thousands of registered Non- Governmental Organizations (NGOs), trusts, and charitable institutions across the country. The deduction for donations made to these entities is capped at a “qualifying limit,” which is 10% of your ‘Adjusted Gross Total Income’ (AGTI). This means you cannot claim a deduction for an amount exceeding this 10% ceiling, even if your actual donation was higher.

What is Adjusted Gross Total Income (AGTI)?

Calculating your AGTI is essential to determine your maximum deduction limit for this category. The formula is straightforward:
AGTI = Gross Total Income (GTI) MINUS Long-Term Capital Gains (LTCG) MINUS Short-Term Capital Gains under Section 111A MINUS All other deductions under Chapter VI-A (like 80C, 80D, etc.), EXCEPT for Section 80G. For a broader overview, you can read our guide on How to Save on Income Tax: Top Deductions and Exemptions Explained.

Examples of donations in this category include:

• 100% Deduction (subject to 10% of AGTI): Donations to the Government or any local authority for promoting family planning.
• 50% Deduction (subject to 10% of AGTI): This is the most frequent type of tax deductions for charity donations in India. It includes donations to any registered and approved charitable institution, religious trust (for repairs/renovation), or any other local authority for charitable purposes (excluding family planning).

The Step-by-Step Guide to Claim Deductions for Donations Under Section 80G

Now that you understand the what and why, let’s move to the how. Following the correct procedure is critical to ensure your claim is accepted by the tax authorities. The Section 80G donation claim process in India has become more streamlined and digital, but it requires careful attention to detail. Here is a clear, step-by-step guide to help you successfully claim deductions for donations under Section 80G.

Step 1: Verify the Eligibility of the Institution

Before you make any donation, your first and most important action is to confirm that the recipient institution is genuinely registered and eligible under Section 80G. Donating to an unregistered or fraudulent entity will not only mean your money doesn’t go to a good cause but will also make your donation ineligible for any tax deduction.

• How to Verify: Ask the institution to provide a copy of its 80G registration certificate. Scrutinize the certificate for the registration number and, crucially, check the validity period. Some registrations are valid for a limited time, while others may be perpetual. Ensure your donation is made within this valid period.

Step 2: Choose the Correct Mode of Payment

The mode of payment is a strict compliance requirement. The Income Tax Department has laid down clear rules to ensure transparency and maintain a documented trail of transactions.

• The Crucial Cash Limit Rule: Any donation made in cash that exceeds ₹2,000 is not eligible for deduction under Section 80G. If you wish to donate ₹2,001 or more, you must use a banking channel.
• Ineligible Donations: Donations made in kind, such as providing food, clothes, books, or other materials, are not eligible for tax deductions under this section. The donation must be a sum of money.
• Accepted Modes: To ensure your donation is eligible, use any of the following methods:
  • Cheque
  • Demand Draft
  • UPI (e.g., Google Pay, PhonePe)
  • Credit or Debit Card
  • Net Banking

Step 3: Collect Mandatory Proof of Donation (Form 10BE)

This is the most significant recent change in the process and the single most important document you need. A simple stamped receipt from the institution is no longer sufficient proof. The donee institution is now legally required to issue a Certificate of Donation in Form 10BE to every donor.

• Why is Form 10BE Mandatory? The government has mandated this to create a verifiable and transparent trail of donations, linking the donor’s PAN to the donee’s records. Without this certificate, you cannot claim the deduction.
• Details on Form 10BE: You must ensure the certificate you receive contains the following accurate details:
  • Name, Address, and PAN of the Donor (your details)
  • Name, Address, and PAN of the Donee (the trust/institution)
  • Unique Registration Number (URN) of the institution
  • The total amount and date of the donation
  • The Section code under which the deduction is applicable (e.g., 80G) and the percentage of deduction allowed.

Actionable Tip: Follow up with the institution immediately after donating to receive your Form 10BE. It is their responsibility to file a statement of donations (in Form 10BD) and issue this certificate to you.

Step 4: Claim the Deduction in Your Income Tax Return (ITR)

The final step is to report this donation correctly when you file your annual Income Tax Return. Merely having the certificate is not enough; you must make the formal claim in your ITR form.

• Where to Claim: In the ITR forms (ITR-1, ITR-2, etc.), there is a dedicated section called ‘Schedule 80G’. You must fill in the details of your donation here.
• Information Required in ITR: You will need to enter the Name and PAN of the donee institution, the amount donated, and the breakdown of how much is eligible for 100% or 50% deduction.
• Auto-population of Data: A helpful feature of the new system is that because institutions now file Form 10BD, the details of your donation may be auto-populated in your ITR form. However, it is your responsibility to verify that this pre-filled information is accurate. If it is missing or incorrect, you must fill it in manually.
• A Note for Salaried Individuals: A key point for claiming 80G deductions for salaried individuals is understanding the difference between informing your employer and filing your ITR. While you can declare your donations and submit proofs to your employer to get your monthly TDS (Tax Deducted at Source) adjusted, this is not the final claim. The legal and mandatory claim must be made by you when you file your ITR by filling out Schedule 80G. For a detailed walkthrough, see our Step-by-Step Guide to Filing Income Tax Returns for Salaried Individuals in India.

Conclusion

Contributing to charitable causes is a fulfilling endeavor, and the government rightly rewards this spirit of giving. By following a structured approach, you can ensure that your goodwill also translates into tangible financial benefits. The key to successfully claim deductions for donations under Section 80G is diligence and documentation.

To summarize the essential steps:

1. Verify the institution’s 80G registration and its validity before donating.
2. Pay via digital channels or cheque for any amount over ₹2,000.
3. Collect the mandatory Certificate of Donation, Form 10BE, from the institution.
4. Claim the deduction by accurately reporting all details in Schedule 80G of your ITR form.

By meticulously following this process, you can confidently navigate the tax laws and secure the tax benefits for donations under Section 80G in India that you are entitled to.

Feeling confident about your donations but need help with the complexities of tax filing? The experts at TaxRobo can help you manage your taxes efficiently and ensure you claim every deduction you are entitled to. Contact us today for a consultation!

Frequently Asked Questions (FAQs) about Section 80G Deductions

1. Can I claim a deduction for donations made in kind, like clothes or food?

Answer: No. Section 80G deductions are only applicable for donations made in monetary form (sum of money). Donations made in kind, such as food, clothes, medicines, or other supplies, are not eligible for any tax benefits under this section.

2. I made a cash donation of ₹5,000 to a temple. Can I claim a deduction?

Answer: No. Any cash donation exceeding the threshold of ₹2,000 is completely ineligible for deduction under Section 80G. To claim a deduction for a donation of ₹5,000, you should have made the payment through banking channels like a cheque, UPI, net banking, or debit/credit card.

3. What is Form 10BE, and is it mandatory to claim the deduction?

Answer: Form 10BE is the official ‘Certificate of Donation’ that the recipient charitable institution is legally required to issue to every donor. Yes, it is absolutely mandatory. Since the financial year 2021-22, the Income Tax Department will not allow you to claim an 80G deduction when filing your ITR unless you have a valid Form 10BE.

4. I submitted my donation receipts to my employer. Do I still need to show them in my ITR?

Answer: Yes, you must. Submitting donation proofs to your employer is a provisional step that helps them calculate your monthly TDS more accurately, potentially leading to lower tax deductions from your salary. However, this does not constitute a legal claim. The final and mandatory claim for the deduction must be made by you personally when you file your annual income tax return by filling in the complete details in ‘Schedule 80G’.