Donate for a good cause, get tax benefit: Here is how to do that

Percentage of donated amount eligible for deduction may vary

If you have donated to the Ayodhya Ram Mandir Trust during the current financial year, you would be entitled to a tax deduction. The central government had recognised the Shri Ram Trust as eligible for Section 80G(2)(b) purposes from 2020–21.

The Income-Tax (I-T) Act of 1961 allows for tax deductions on donations made to a variety of notified charitable organisations and religious trusts (including mosques, gurudwaras and churches) under Section 80G. Says Rudra Srivastava, partner, Singhania & Partners LLP: “Sections 80G, 80GGA, 80GGB, and 80GGC of the I-T Act pertain to deductions linked to donations. An assessee can avail deductions ranging from 50 to 100 per cent of the donation amount, based on the recipient’s eligibility.”
 

Section 80G

Section 80G provides the overarching framework for tax deductions on donations made to charitable trusts, religious organisations, and other specified entities. Individuals can claim these deductions against their gross total income.

Donations to some specified organisations are eligible for a 100 per cent or 50 per cent deduction without any limit linked to the qualifying amount. For others, the deduction is limited to either 50 per cent of the donation or 10 per cent of the adjusted total income, whichever is lower. Says Suresh Surana, founder, RSM India: “Only monetary donations qualify for deductions. Donations in kind, such as food, clothes, medicines, etc. do not. Donors should obtain a certificate of donation in Form 10BE from the recipient to claim this deduction in their tax returns.” Cash donations are limited to Rs 2,000.

Section 80G(2)(b)

Section 80G(2)(b) is a subsection of 80G, focused on donations made to certain funds and charitable institutions specified by the govern-ment. It usually includes institutions engaged in activities like education, medical relief, and other social and community welfare programmes.
 

Contributions to Shri Ram Trust, for instance, are eligible for tax benefits under this section since 2020–21. Says Avinash Polepally, senior director, Clear: “Donations towards temple renovation or repair qualify for a 50 per cent deduction. However, deductions exceeding 10 per cent of adjusted gross total income will not be allowed.  Donations for purposes other than temple repair and renovation will also not be allowed.”
 

Cash donations above Rs 2,000 and non-monetary donations also do not qualify. Online or cheque donations are permissible. Polepally emphasises the importance of retaining donation receipts for claiming deduction.


 

Section 80GGA

This section provides deductions for donations towards scientific research or rural development. The eligibility limit for donations under Section 80GGA is 100 per cent of the donation made.
 

Deductions are valid for cash (up to  Rs 2,000), cheques, demand drafts, or electronic transfers. However, individuals with business or professional income are not eligible for these deductions.
 

Says Ronodeep Dutta, counsel, AQUILAW: “If the expenditure is made for carrying out rural development programmes, the donor must furnish a certificate from the donee to the effect that it is an approved programme.” No specific limit is mentioned for this deduction. Says Nikhil Varma, managing partner, MVAC Advocates & Consultants: “Contributions in cash exceeding Rs 10,000 are not eligible for deduction.”

 

Section 80 GGB
 

This section allows 100 per cent deductions (without any upper limit) to any Indian firm (registered under the Companies Act, 2013) for donations or contributions made to a registered political party or an electoral trust.


 

Section 80GGC
 

It allows individuals to claim deductions for contributions made to political parties. Says Varma: “Contributions made in cash, as well as contributions by a local authority and a juridical person, do not qualify for tax deductions under Section 80GGC.”   Alay Razvi, partner, Accord Juris LLP points out that all donations must be made through banking channels. Funds from outside India are also not eligible.
 

Varma emphasises the importance of verifying a political party’s registration status. Contributors must ascertain that the party is registered under Section 29A of the Representation of the People Act, 1951. A deduction of 100 per cent of the amount contributed can be availed. Dutta advises that contributors should request explicit acknowledgement on their receipts from the political party that the contributions are eligible for deductions under Sections 80GGB and 80GGC.
 

Finally, experts warn that some taxpayers take advantage of these provisions by making substantial donations to charitable trusts to lower their taxable income and ultimately reduce the amount of tax they owe. When a salaried person pays an exceptionally high amount to tax professionals, that acts as a red flag for the tax authorities. Under all circumstances, maintain proper proof of donations made to be able to prove the legitimacy of your claim.