Deduction Limit For Individual Under Section 80G of Income Tax Act
Introduction
Donating to a good not only brings satisfaction but also helps in saving taxes. Under Section 80G of the Income Tax Act, individuals can claim deductions on donations made to approved charitable institutions. It’s important to understand the 80G deduction limit, eligible donations, and how much you can claim. This blog will guide you through all the key details you need to know about the 80G deduction limit for individuals.
What is Section 80G?
Section 80G of the Income Tax Act, 1961, allows taxpayers to claim deductions on donations made to certain charitable institutions and relief funds. The main purpose of this section is to encourage individuals to contribute to social and charitable causes by offering tax benefits. Only donations made to organizations registered under Section 80G are eligible for this deduction. The amount of deduction can be either 50% or 100% of the donated amount, with or without a qualifying limit, depending on the type of institution.
What are the Eligibility Criteria for Individuals Deduction Limits?
To claim a deduction under Section 80G, individuals must meet the following conditions:
- Taxpayer in India: The individual must be a taxpayer filing Income Tax Returns in India.
- Mode of Donation: Donations must be made in monetary form through cash, cheque, bank transfer, or digital payment. Donations in kind (like food, clothes, or medicines) are not eligible.
- Cash Donation Limit: Cash donations exceeding ₹2,000 are not allowed for deduction. Any amount above this must be paid through non-cash modes.
- Recipient Eligibility: The donation must be made only to institutions or funds that are registered under Section 80G and have a valid certificate.
- Proper Documentation: The donor must keep the donation receipt that includes the name, address, PAN, and 80G registration number of the institution.
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Types of Donations and Deduction Limits
When you donate money, the tax benefit you get under Section 80G depends on the type of organization you give to and some rules about limits. Here are the main types:
1. 100% Deduction Without Any Limit
For some special funds like the Prime Minister’s National Relief Fund or the PM CARES Fund, you can get a full tax deduction on the entire amount you donate. There is no upper limit on how much you can claim.
2. 50% Deduction Without Any Limit
Donations to certain funds, like the Prime Minister’s Drought Relief Fund, qualify for half the amount donated as a deduction. Again, there is no limit on how much you can claim here.
3. 100% Deduction But Limited to 10% of Your Income
If you donate to some government approved organizations (for example, for family planning programs), you can claim the full donation amount as a deduction. But this deduction is limited to 10% of your adjusted total income.
4. 50% Deduction But Limited to 10% of Your Income
Most other donations to registered charities or NGOs fall here. You can claim 50% of the donated amount as a deduction, but only up to 10% of your adjusted total income.
This means the tax benefit depends on who you donate to and your income. Always check the organization’s 80G certificate to know the exact deduction you can claim.
How to Claim 80G Deduction?
- Donate to a Registered Organization: Make sure your donation is to a charity or fund that has a valid 80G certificate from the Income Tax Department.
- Get a Donation Receipt: Ask for a receipt from the organization. It should include their name, address, PAN, 80G registration number, and the amount you donated.
- Use Proper Payment Method: Pay by cheque, bank transfer, or digital methods for amounts above ₹2,000. Cash donations over ₹2,000 are not eligible.
- Mention Donation Details in Your Tax Return: When filing your Income Tax Return (ITR), enter the donation amount under the Section 80G deduction section.
- Keep Proof Safe: Retain the donation receipt and proof of payment. You don’t have to submit these with your return, but keep them handy in case the tax department asks for verification.
Conclusion
Understanding the 80G deduction limit is essential for individuals looking to maximize their tax benefits while supporting charitable causes. By donating to eligible organizations and following the correct procedures, taxpayers can claim deductions up to the specified limits under Section 80G. Always ensure you keep proper receipts and check the eligibility of the institution to make the most of your tax savings.
Suggested Read :
Donation Tax Deductions Under Section 80G
Difference between 12A and 80G
How to Download 12A and 80G Certificate?
NGO Donation Tax Exemption under Section 80G
FAQ
1. What is Section 80G of the Income Tax Act?
Section 80G allows taxpayers to claim deductions for donations made to certain approved charitable organizations and funds.
2. Who is eligible to claim deductions under Section 80G?
Any individual taxpayer in India who donates to a registered charitable institution with a valid 80G certificate can claim the deduction.
3. Can I claim a deduction for cash donations?
Yes, cash donations up to ₹2,000 are eligible for deduction. For donations above ₹2,000, payment must be made via cheque, bank transfer, or digital methods to qualif
4. How much can I claim as a deduction under Section 80G?
The deduction can be either 50% or 100% of the donated amount, depending on the organization, and sometimes limited to 10% of your adjusted gross total income.
5. Is it necessary to keep donation receipts?
Yes, it’s important to keep the donation receipt as proof, including the organization’s details and 80G registration, in case the Income Tax Department requests it during assessment.
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