Claiming Section 80G Deduction: A Guide to Include it in Your ITR Filing

Claiming Section 80G Deduction - Deduction - ITR Filing - taxscan

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.

  • Donations Eligible for 100% Deduction: Certain donations you make are eligible for a 100% deduction without having any maximum limit. Some of these deductions include contributions to the National Defense Fund, Prime Minister’s National Relief Fund, and select approved educational and scientific research institutions.
  • Donations Eligible for 50-100% Deductions: Most charitable organisations fall under this category. The donations you make to these organisations qualify for a deduction of 50% or 100% of the donated amount. This is subject to a maximum limit of 10% of your gross total income. Thus, it is extremely important to know the applicable deduction percentage and the maximum limit while calculating your tax benefits.

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.

  • Get the Required Documentation: You must collect the receipts or acknowledgements you would have received from the charitable organisations you’ve donated to during the financial year. Ensure these documents include the donation amount, the organisation’s registration details, and their 80G certification number.
  • Fill out the ITR Form: While filling out the Income Tax Return form, find the section dedicated to deductions under Chapter VI-A. Here, you will find the subsection for Section 80G, and you must enter the required details. These include the organisation’s name and registration number, donation amount, and the eligible deduction.
  • Maintain Records: Ensure that you keep the original donation receipts or acknowledgement papers, as they can serve as supporting evidence if needed by the IT Department. You must keep these documents safely with you for around 6-7 years from the end of that particular assessment year.

Things to Consider While Claiming Deductions

Before claiming Section 80G deductions, you must consider the following aspects.

  • Verify the Validity of the 80G Certificate: It is crucial that you verify the validity and authenticity of the 80G certificate of the charitable organisation before making a donation. The 80G certificate demonstrates that the organisation meets the necessary criteria for tax exemptions. One way to verify its authenticity is by visiting the Income Tax Department’s website or calling their helpline number.
  • Know the Difference Between 80G and 80GGA: You must do due diligence before filling out your ITR forms. Sections 80G and 80GGA are different; Section 80G applies to individual taxpayers. On the other hand, Section 80GGA applies to taxpayers who do not earn any income from business or profession. Thus, you must select the correct section depending on your income sources.
  • Know the Prescribed Limits: As earlier discussed, Section 80G deductions can have specified limits. You must ensure that your claimed deduction is within this cap. Calculate your eligible deduction correctly to avoid discrepancies.
  • Ensure that the Documentation is Accurate: You must maintain transparency and accuracy while providing documentation. All the receipts and acknowledgements from charitable organisations should mention the donation amount, the organisation’s registration details, and their 80G certification number. If there are any discrepancies, get in touch with the organisation for clarification.
  • Seek Professional Assistance: Filing tax returns is a complicated procedure. Most individuals rely on professional assistance and employ chartered accountants or tax consultants. If you find the process of claiming Section 80G deductions difficult or complex, you should seek professional assistance. This way, you can be assured of accurate calculations and maximise your tax benefits.

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.

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