How Section 80G Can Help You in Saving Tax?

One of the best ways to save money on taxes while also doing your part to help the world is by donate money to charity that will count as deductions under Section 80G. These donations must be given to trusts or institutions that are eligible.

Section 80G of the Income Tax Act majorly deals with donations that are made to charity, with the goal of providing tax benefits to those who indulge in charity works. Donations to specific funds or charities are eligible for tax deductible donation for exemption under 80G. Any amount donated to an authorized charity by an individual can be claimed as a tax deduction when filing a tax return.

Eligibility & Validation

Any assesses (individuals, corporations, and Hindu undivided families) are eligible to donate to charity and claim a deduction under Section 80G, subject to the government’s limits. NRIs are also eligible for Section 80G benefits if they make donations to government trusts or institutions.

For a donation to be valid under Section 80G, some basic criteria must be met; some of the most important ones are listed below.

• Only taxable or exempted income should be used to make donations. Donations made with non-taxable income are not eligible for a tax deduction.
• Only cash or check donations are acceptable for Section 80G deductions; gifts in the form of clothes, food, medications, and other items are not included. Only firms are eligible for deductions when it comes to donations to the Indian Olympic Association.
• Donations to authorized and registered trusts are the only ones that qualify for tax deductions.

Deductions Under Section 80G

Certain restrictions apply to donations made to qualifying trusts/charities that qualify for tax exemption. Donations made under section 80G can be divided into four types, as listed below.

• First, Donations with a 100% tax deduction (no qualification limit): Donations in this category receive a 100% tax deduction and are not subject to any qualification limits. Such deductions are available for donations to the National Defense Fund, Prime Minister’s National Relief Fund, and National Foundation for Communal Harmony, National/State Blood Transfusion Council, and others.
• Second, Donations with 50% deduction (no qualifying limit): Donations to trusts such as the Prime Minister’s Drought Relief Fund, the National Children’s Fund, the Indira Gandhi Memorial Fund, and others are eligible for a 50% tax deduction on the amount donated.
• Third, Donations with a 100% deduction (subject to 10% of calculated gross total income): This category includes donations to local authorities or the government to promote family planning, as well as donations to the Indian Olympic Association. Only 10% of the donor’s Adjusted Gross Total Income is eligible for deductions in such instances. Donations in excess of this amount are rounded up to the nearest 10%.
• Fourth, Donations with a 50% deduction (subjected to 10% of adjusted gross total income): Donations made to any local authority or government that will use the money for any charitable purpose are eligible for this deduction. Only 10% of the donor’s Adjusted Gross Total Income is eligible for deductions in such cases. Donations in excess of this amount are subject to a 10% tax.

So, this is how one can avail of the tax benefits under 80G of the Income Tax Act.