The Income Tax Act of 1961 includes the rules and regulations that govern the Indian taxation system. This Act has been designed to promote economic growth, promulgate employment, and control economic fluctuations. This is done by ensuring that the taxes are properly levied, collected, administered, and recovered by the Indian government. For taxpayers in the country, it is crucial to understand the different sections of the Income Tax Act, as it allows you to make sound investment decisions.
Thus, tax planning is crucial to managing personal finances. The Income Tax Act (the old regime) provides various deductions and exemptions that reduce your tax liability. One such section that helps taxpayers claim deductions for the donations made to eligible charitable organisations is Section 80G.
So, what are Section 80G deductions, and how do they help you reduce your tax burden while filing your income tax returns? By including Section 80G deductions in your ITR filing, you can claim deductions from your taxable income while supporting causes that are close to your heart.
What is Section 80G?
Section 80G of the Income Tax Act was designed to encourage taxpayers to partake in philanthropic work. Individuals and organisations that contribute to charitable causes enjoy certain tax benefits under this section. If you make donations to eligible charitable institutions, you can claim deductions u/s 80G. Moreover, the amount that is eligible for deduction differs based on the beneficiary type and the mode of donation.
Donations Eligible for Deductions
Before you pick a charitable organisation, you must know which type of donations are eligible for tax deductions under Section 80G. These donations must meet specific criteria, and only contributions that are made to eligible organisations qualify for deductions. Typically, these organisations include trusts, societies, and institutions that are registered under the Income Tax Act. Moreover, they should have obtained a valid 80G certification from the Income Tax Department. The 80G certification serves as proof of eligibility for availing of tax benefits.
Modes of Donation
You can make donations through several modes, including cheques, demand drafts (DD), online transfers, or even in-person contributions. However, while making in-kind contributions, you must remember that Section 80G deductions only apply to cash donations not exceeding ₹2,000. Furthermore, to claim the deduction, you must get a receipt or acknowledgement from the charitable organisation mentioning the amount and their registration details.
Computing the Deductions
As previously mentioned, the Section 80G deductions depend on the category of the beneficiary and the maximum limit prescribed. Let us take a closer look at the different scenarios.
How Can You Claim Deductions?
At the time of filling out your ITR form, you must follow these steps to include your Section 80G deductions.
Things to Consider While Claiming Deductions
Before claiming Section 80G deductions, you must consider the following aspects.
Final Thoughts
Section 80G allows you to contribute to charitable causes that are close to your heart while reducing your tax liability. You must understand the eligibility criteria, how to calculate deductions, and the correct procedure to claim Section 80G deductions to enjoy significant tax benefits. At the same time, you must exercise due diligence, keep relevant documents, and comply with the specified guidelines to avoid complications. By mentioning the Section 80G deductions while filling out your ITR forms, you can support your favourite causes while optimising your finances.