Updated: Feb 5, 2021
All you need to Know about Tax Treatment of Donations
Donation is part and parcel of every fortunate human being to share there fortune with less fortunate. Yes, it is really an admirable action and fundamental of ethics of sharing. Sharing can be of any type and to anyone. Income Tax Dept recognizes your good deeds too. Any donation to prescribed charitable institutions and other funds (as discussed further in this article) are eligible for deduction under Income Tax Act from Gross total income. Let's discuss in detail about which donations are eligible for deduction.
In this blog we will discuss about the eligibility, requirement, list of institutions for different qualifying limit, calculating maximum donation allowable for deduction and much more.
Section 80G and 80GGC of the Income Tax act states for the deduction for Donation to charitable institutions and Government respectively.
Lets first discuss about deductions for donation to prescribed charitable Institutions:
Who is Eligible?:
Every tax payer who makes donation to prescribed institutions can claim deduction for the same, subject to certain terms and condition.
Mode of Payment:
Till FY 2017-18, only donations made in cash/cheque are eligible for deduction under 80G, but one should consider the following:
Cash donation is allowable up to Rs.10,000*/- only.
Donation in kind is not eligible for tax deduction.
Donor must obtain a valid donation receipt for availing deduction (it acts as a Valid proof).
Receipt should have Name, Address, PAN, Registration Number and validity of registration of Trust or Institution mentioned on it, and the amount of donation.
Receipt should contain name of Donor
"Starting from FY 2017-18 limit for cash donations is reduced to Rs.2,000/- only. Rest all conditions remain the same."
Maximum eligible Deduction under 80G
Donation to certain institution are eligible for 50% or 100% with or without any maximum qualifying limit. Lets discuss further about this:
Donation eligible for deduction without any Maximum Limit:
Category 1: Donation eligible for 100% deduction without maximum Limit:
Donation to following institutions or funds are eligible for 100% deduction without any qualifying limit:
National Illness Assistance Fund
National Blood Transfusion Council or to any State Blood Transfusion Council
National Defence Fund set up by the Central Government
Prime Minister’s National Relief Fund
National Foundation for Communal Harmony
Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
Fund set up by a State Government for the medical relief to the poor
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
An approved university/educational institution of National eminence
National Sports Fund
National Cultural Fund
Fund for Technology Development and Application
National Children’s Fund
Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6, 1993
Chief Minister’s Earthquake Relief Fund, Maharashtra
Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001) or
Prime Minister’s Armenia Earthquake Relief Fund
Africa (Public Contributions – India) Fund
Swachh Bharat Kosh (applicable from FY 2014-15)
Clean Ganga Fund (applicable from FY 2014-15)
National Fund for Control of Drug Abuse (applicable from FY 2015-16)
Category 2: Donation eligible for 50% deduction without maximum Limit:
Deduction to following institution or fund is eligible for 50% deduction without any qualifying limit:
Jawaharlal Nehru Memorial Fund
Prime Minister’s Drought Relief Fund
Indira Gandhi Memorial Trust
Rajiv Gandhi Foundation
Donation eligible for deduction with Maximum Limit:
Category 1: Donation eligible for 100% deduction with maximum Limit:
Donation to following institution/fund is allowable as 100% deduction subject to 10% of Adjusted Gross Total Income (discussed in later part of this article).
Government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning.
Donation by a Company to the Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India.
Category 2: Donation eligible for 50% deduction with maximum Limit:
Donation to following institution/fund is allowable as 50% deduction subject to 50% of 10% of Adjusted Gross Total Income (discussed in later part of this article).
Any other fund or any institution which satisfies conditions mentioned in Section 80G(5) i.e only if such institution is established in India for charitable purpose.
Government or any local authority to be utilized for any charitable purpose other than the purpose of promoting family planning.
Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both.
Any corporation referred in Section 10(26BB) for promoting interest of minority community
For repairs or renovation of any notified temple, mosque, gurudwara, church or other place
If your donation is eligible for 100% tax deduction then:
You also require a Form 58 from the trust or institution.
Details like cost of project, amount authorized for project & actual amount collected by the institute is mentioned in Form 58.
Without Form 58, your claim for 100% tax deduction can be rejected even if you have stamped receipt.
Now Lets see what is Adjusted Gross Total Income for the purpose of calculating maximum allowable deduction:
Adjusted gross total Income can be derived by following formula:
In case of Donation eligible for 50% deduction with maximum Limit:
So now we know almost everything about donation under income tax, its allow-ability, maximum limit, criteria and so on. So, keep doing the good deeds!!
Amish Maknojia is a CA student and an enthusiastic entrepreneur and founder of iDeal ConsulTax. Aiming at creating a unique and organised approach to consultancy with his expertise and experience of 5 years. He has so far achieved a milestone in fulfilling the need of the startups.