To encourage charity amongst taxpayers, our Government is providing deduction for contribution (donation) made to registered Charitable Organizations. Deduction under 80G can be availed by any taxpayer, whether resident or non-resident.
There are some rules made by the government for donation to charitable purpose which are as follows:-
- Deduction can be claimed only if the charitable trusts or organisations are registered under the Income Tax Act.
- Only monetary contributions made i.e. in cash, cheque or demand draft are allowed as deduction. Hence, donations in kind (i.e. donating clothes, food items, necessities etc.) are not allowed as deduction.
- The deduction is allowed for donation made in cash only if donation amount does not exceed Rs. 10,000/- in cash. In other words, no cash donations of more than 10,000/- are allowed.
There is a misconception that 100% deduction is available for every contribution made. But this is not true. As per the Income Tax Act, 1961 deductions are available under following three categories:
1) 100% deduction of contributions made:-
i) Swachch Bharat Kosh (Introduced vide Budget 2015),
iI) Clean Ganga Fund (Introduced vide Budget 2015),
iiI) Prime Minister’s National Relief Fund,
iv) National Defence Fund,
v) National Foundation for communal Harmony,
vi) Approved university or educational institution of national eminence,
vii) The National Blood Transfusion Council or a State Blood Transfusion Council,
viii) Zila Saksharta Samitis,
ix) National Illness Assistance Fund,
x) The Army Central Welfare Fund,
xi) National Sports Fund or National Cultural Fund.
2) 50% deduction of contributions made to any specific trusts:-
Some well-known trusts working for social cause are as follows:
i) Jawaharlal Nehru Memorial Fund
ii) Prime Minister’s Drought Relief Fund
iii) National Children’s Fund
iv) Indira Gandhi Memorial Trust
v) The Rajiv Gandhi Foundation
3) 50% deduction of contributions made to any other charitable trusts:
Many trusts work for social cause i.e. education, health, upliftment of poor etc. If you contribute to these trusts, 50% deduction is available for contributions made to these trusts.