Donations Under Section 80G: Check Eligibility Before Claiming Tax Deductions

If you are contributing to a good cause, you can also reduce your tax. Certain prescribed donations under Section 80G of the Income Tax Act, 1961 (“IT Act”) are eligible as deductions in computing taxable income for taxpayers opting for taxation under the old regime.

Sub-sections (1) and (2) of Section 80G of the IT Act prescribe the donations that qualify for 100 per cent and 50 per cent deductions. The donations that qualify for a 100 per cent deduction include donations in national-level funds like the Prime Minister's National Relief Fund (PMNRF), National Defence Fund, PM CARES Fund, Clean Ganga Fund, and armed forces welfare funds (e.g., Army Central Welfare Fund).

It is also available for donations to approved universities of national eminence or certain disaster relief funds. Further, a 50 per cent deduction is available for donations to NGOs and charitable trusts having registrations under Sections 12A or 80G of the IT Act.

Verify Before You Donate

“In order to ensure that the donations are not made to fraudulent institutions or organisations that are ineligible for tax deductions, taxpayers must verify that the NGOs/charitable trusts have valid registration under Sections 12A or 80G of the IT Act. This can be easily verified on the e-filing portal of the income tax department by inputting the PAN of the organization,” says SR Patnaik, partner (head - taxation), Cyril Amarchand Mangaldas.

Taxpayers should only make donations if the registration details are available on the income tax e-filing portal. Further, taxpayers should maintain receipts of the donations for claiming tax deductions under Section 80G at the time of filing their returns.

Social Purpose With Financial Benefit

Crowdfunding platforms have made it easier and more accessible for taxpayers wanting to make donations for causes they care about, while also saving taxes in case they opt for taxation under the old regime.

“As the entire process of donations is shifting online, with all information regarding the NGOs and charities available on such websites, it has also become more transparent for the taxpayers to verify the registration of the NGOs on the income tax e-filing portal and check if their donations are eligible for tax deductions,” says Patnaik.

The online platforms also enable the taxpayers to ask the institutions for accountability by asking them to show how the funds are being used and the actual impact of their donations.

“This increased level of transparency and accountability enables taxpayers to keep the NGOs in check by ensuring that their donated funds are being used correctly and to also ensure that they have valid registrations under Section 80G of the IT Act and are renewing their registrations timely on expiration,” says  Patnaik.

This way, individuals can ensure that their donations are serving a social purpose, and they are also able to claim tax deductions for the same.