80G donation limit for salaried person
Introduction
When it comes to saving tax, charitable donations can be a powerful tool. The Indian Income Tax Act provides several provisions to encourage taxpayers to contribute to charitable causes. One of the most popular sections utilized for this purpose is Section 80G, which allows taxpayers to claim deductions on donations made to eligible charitable organizations. For salaried individuals, understanding the limits and rules under Section 80G is essential to maximizing tax benefits while supporting worthy causes. This article explores the variations of Section 80G donation limits for salaried persons, explaining eligibility, deductions, limits, and related tax implications.
What is Section 80G of the Income Tax Act?
Section 80G is a provision under the Income Tax Act, 1961, that offers taxpayers a deduction on donations made to certain relief funds and charitable institutions. The primary aim is to encourage generosity and help NGOs raise funds for social causes. Donations made to these specified institutions qualify for tax deductions either at 100% or 50% of the donated amount, with or without restrictions.
Key Points:
- Only donations made to approved funds and institutions qualify.
- The deduction amount can be 50% or 100% of the donation.
- Some donations have an upper limit of 10% of Adjusted Gross Total Income.
- Donations can be made in cash, cheque, or digital transfer.
Donation Limits for Salaried Persons Under Section 80G
Is There a Fixed Limit on Donation Amount?
There is no absolute fixed monetary limit on how much a salaried individual can donate under Section 80G. However, the deduction claimed on donations has a ceiling based on the taxpayer’s gross adjusted total income.
Understanding the 10% Limit
Donations eligible for 50% or 100% deduction can be claimed only up to 10% of your Adjusted Gross Total Income (AGTI).
AGTI is your total income before claiming any deduction under Section 80G, excluding losses from house property and speculative business.
For example, if your AGTI is ₹10,00,000, the maximum donation amount eligible for deduction will be ₹1,00,000.
What if You Donate More Than the Limit?
If your donation exceeds 10% of your AGTI, the excess amount does not qualify for deduction under Section 80G in that financial year.
Types of Donations and Their Deduction Rates
Not all donations qualify for the same deduction rate. The IT Department classifies charitable institutions into categories:
- 100% Deduction Without Any Qualifying Limit
Some donations receive a 100% deduction without any upper cap. Examples include:
- Prime Minister’s National Relief Fund
- National Defense Fund
- Electoral Trusts
- 100% Deduction Subject to 10% of AGTI
Donations to some institutions like government-approved charitable trusts, university funds, and relief funds may qualify for 100% deduction but limited to 10% of AGTI.
- 50% Deduction Subject to 10% of AGTI
Most charitable donations fall into this category, such as donations to NGOs registered under Section 80G but not specified for 100% deduction.
- Donations Not Eligible for Deduction
Donations made in cash above ₹2,000 are not eligible for deduction. Donations to institutions not approved under Section 80G are also disqualified.
How Does a Salaried Person Claim 80G Deduction?
Step-by-step process:
- Verify the NGO’s 80G certificate: Ensure the organization is registered under Section 80G and has a valid 80G certificate.
- Keep Proof of Donation: Obtain a receipt mentioning the donor’s name, PAN, amount donated, date, and 80G registration number of the NGO.
- Mode of Donation: Donate via cheque, demand draft, online transfer, or any non-cash mode to claim deduction.
- Claim Deduction in Income Tax Return: While filing ITR, report the donation amount under Section 80G in the deductions section.
- Attach Receipt (if required): Keep the receipt safely, as the Income Tax Department may ask for proof during assessment.
Impact of 80G Deduction on Taxable Income
By claiming deductions under Section 80G, a salaried individual effectively reduces their taxable income. This lowers the overall tax liability and increases savings. For example, if you donate ₹50,000 to an eligible NGO under the 50% category, the deduction will be ₹25,000, reducing your taxable income by that amount.
Special Notes for Salaried Employees
- Donations should ideally be planned considering your AGTI to maximize benefits.
- Donations via salary deduction under CSR or other schemes are eligible if proper receipts are issued.
- Salaried taxpayers should maintain receipts and certificates carefully for audits.
- Donations made in cash above ₹2,000 are not eligible, so always use digital or cheque payments.
- Remember that Section 80G deductions are over and above deductions under Section 80C and other sections.
Benefits of Claiming Donations Under Section 80G for Salaried Individuals
- Tax Savings: Reduce tax outgo by claiming eligible deductions.
- Social Impact: Support causes and organizations that work towards societal betterment.
- Financial Planning: Incorporate charitable giving as a part of tax and financial planning.
- Promotes Transparency: NGOs issue receipts, which ensures donation is traceable and accountable.
- Satisfaction of Giving Back: Apart from financial benefits, giving to charity fosters a sense of social responsibility.
Common Misconceptions About Section 80G Donations
- “All donations qualify for 80G deductions.” — Not true. Only donations to registered organizations with valid 80G certificates qualify.
- “Cash donations above ₹2,000 are deductible.” — No, cash donations above ₹2,000 are not eligible for deduction.
- “Donations to political parties qualify under 80G.” — No, political donations are governed under Section 80GGB and 80GGC.
- “You can claim a 100% deduction on all donations.” — Only certain funds offer a 100% deduction; most offer 50%.
- “Donations must be made every year to claim deduction.” — Donations can be one-time or recurring, but claimable only for the year they are made.
Conclusion
For salaried individuals, Section 80G offers a valuable opportunity to reduce taxable income while contributing to meaningful causes. Although there isn’t a fixed donation limit in monetary terms, the deduction is limited to 10% of your Adjusted Gross Total Income for most donations, with some exceptions allowing a 100% deduction. To maximize benefits, always donate to eligible organizations, keep proper receipts, and plan your donations according to your income. Charitable giving not only helps reduce tax liability but also plays a vital role in promoting social welfare and responsible citizenship.
By understanding the rules and limits under Section 80G, salaried taxpayers can make informed decisions, ensuring their donations create both social and financial impact.
Suggested Read :
Renew a Trust License in India
Important compliances for NGOs in India
Exemptions under Section 80G and 12A / 12AA
How to apply for Section 12AA registration?
Renew a Trust License in India
FAQs
1. Is there any fixed monetary limit on donations under Section 80G?
No, but the deduction is limited to 10% of Adjusted Gross Total Income for most donations.
2. Can a salaried person claim a 100% deduction on all donations?
No, only donations to specific funds like Prime Ministers Natural Relief Fund (PMNRF) qualify for 100% deduction without limit.
3. Are cash donations eligible for deduction?
Cash donations above ₹2,000 are not eligible. Donations must be made through cheque or digital transfer.
4. How to verify if an NGO is eligible for 80G deduction?
Check if the NGO has a valid 80G certificate issued by the Income Tax Department.
5. Can donations be carried forward if they exceed the limit?
Generally, no. Excess donation beyond the 10% limit cannot be carried forward for deduction.
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