Section 80G of the Income Tax Act, 1961, allows taxpayers to save tax by donating money to eligible charitable institutions. By donating to eligible institutions and organisations, taxpayers can claim deductions ranging from 50% to 100% of the amount donated. However, there are certain limits and conditions that need to be fulfilled to avail of these deductions.
All taxpayers, whether resident or non-resident, who have donated money to prescribed funds, institutions, or associations are eligible to claim a deduction from gross total income before levy of tax, under Section 80G. However, it's important to note that this deduction can only be claimed by taxpayers who have opted for the old tax regime. Taxpayers under the new tax regime cannot avail of this deduction benefit.
The deduction under this provision is allowed as follows:
1. 100% deduction without any maximum limit
2. 50% deduction without any maximum limit
3. 100% deduction subject to a maximum limit
4. 50% deduction subject to a maximum limit
While claiming the deduction, the first step is to check the category to which the fund/charitable institution belongs. This will help to determine the deduction percentage (100% or 50%) and whether there is a maximum or qualifying limit.
Payments to certain institutions are eligible for 100% or 50% without any qualifying limit. However, in some instances, you must first determine the maximum qualifying limit, which is eligible for deduction. If the total amount donated to those specified funds or institutes exceeds 10% of your adjusted gross total income (GTI), any excess amount beyond the 10% limit will not be eligible for deduction.
The adjusted gross total income shall be computed after reducing the following from your gross total income:
1. Amount deductible under Section 80C to 80U (Except Section 80G)
2. Share of profit in Association of Persons (AOP) eligible for rebate under Section 86
3. Long-term capital gains
4. Short-term capital gain arising from securities specified under Section 111A
5. Any income referred to in Sections 115A, 115AB, 115AC, 115ACA, 115AD and 115D
