Understanding Section 80G & Tax Exemption for Indian Donors

Taxes. We don’t love the discussion, but when it comes to tax deductions, you can’t help but be all ears. Every year, there is an attempt by taxpayers to find ethical ways to cut down on their taxes. Who would have thought giving to a charitable organization could ease some of your taxable income? Of course it can!

One of the best things about giving to a charity, apart from the amazing feeling of making a difference, is that you can reclaim a significant part of what you donate to your resonating cause.

To encourage donations and generosity amongst Indian taxpayers, the government of India has provisions for all donors– individuals, corporate institutions, firms and Hindu Undivided Families. But, to enjoy total benefits, it is crucial to have the correct information that helps you make the best decision for your giving habits. So, let’s dig deep into what tax exemption looks like for an individual donor in India.

What is Section 80G of the Income Tax Act, and who can claim it?

Introduced and implemented in 1961, Section 80G of the Income Tax Act enables taxpayers to claim up to 50% to 100% of their charitable donations as tax deductions. This act encourages donors to invest more in change and take steps towards a positive social impact with their small acts of generosity. All you need to do is choose a charity registered for a valid 80G certificate issued by the Income Tax Department of India.

According to Section 80G, all tax-paying individuals and corporate firms are eligible to benefit from the tax redemption provision. Employees who donate to charity through their salaries can claim a deduction if they possess the verifying documents for the donations.

Donations made to international charities aren’t eligible for exemption. However, non-resident Indians (NRIs) who donate to non-profits are eligible for an 80G exemption if the charity is registered to issue certificates to international donors.

Limitations to look out for:

To successfully exempt your tax benefits as a donor in India, here are specific criteria you need to take note of.

1.    Cash Donations

All donations made in cash, cheque, or other electronic modes are covered under the 80G income tax act. However, donations made in kind or exceeding INR 2,000 in cash are not eligible for a tax deduction. If you are someone who loves to donate with an open heart, online fundraisers are you best giving gateway.

2.    Percentage of Deduction

The percentage of tax deductions varies depending on the nature of the non-profit and the donor’s contribution. Donations usually fall under one of the four categories – 100% deduction without any limit, 50% deduction without any limit, 100% deduction subject to a qualifying limit, or 50% deduction subject to a qualifying limit. Most of the private non-profits fall into the last two categories. So, it is always a good idea to be informed about the tax deduction provisions of the non-profit.

3.    Aggregate Limit

The maximum allowable donation under Section 80G for institutions providing a deduction with a qualifying limit is capped at 10% of the donor’s gross total income. In case of exceeding in the donations, the qualifying limit stays the same and you are entitled to claim the said percentage of the 10% limit. Hence, it is important to be aware of the amount you donate to which organization to avoid any surprises later. 

4.    Validity Period

The 80G certificate is valid for a limited period, after which a donor cannot avail of the tax benefits anymore. Hence, it is important to keep track of the validity period of the certificate and claim your deduction before it expires.

What documents do you need to claim the tax benefits?

A significant tax deduction can be accessed only if your donation is completed with the proper set of documents. Here are the ones you should look out for:

1.    The 80G Donor’s Certificate

After donating to a registered non-profit, you are set to receive a donor’s certificate, which should ideally contain the name, address, PAN, and registration number of the charity/non-profit you are donating to. It should also contain the donor’s name, the amount donated (both in numerals and words), and the mode of donation. This certificate is the proof of your donation and is mandatory for all deductions.

2.    PAN Number

The certificate you receive from the institution should contain the PAN number of the organization, which confirms the legitimacy of the non-profit. It is your responsibility to check that all necessary information is printed on the certificate you receive from your non-profit.

3.    Registration Certificate

Every registered non-profit holds a registration certificate with a unique registration number issued by the income tax department. Donors must make it a point to obtain a copy of the certificate that is used for the required verification of the non-profit.

Taxes can be tricky but all it needs is a little bit of awareness and effort to make the best out of what you have. Now that you have learned about the 'hows, whats, and whens' of your charitable tax deductions, you can now embark on your fulfilling journey of giving. With all your information, you can save hundreds of lives with simple actions, and GfG is here to assist you throughout.

Kickstart your giving journey with GfG and claim up to 50% tax exemption!

Giving has never been simpler and more rewarding. The Giving for Good Foundation provides you with a platform where you can support education, sports, and women empowerment with our niche and result-oriented fundraisers. GfG is a registered Section 8 Charity, and all donations made are eligible for up to 50% exemption.

You can join this fruitful journey as our individual Goodness Buddy or as our corporate partner because no donation is too small when it fills someone’s life with hope and opportunities. Tax exemptions are just a part of the massive bag of joy that giving for a cause brings you. Don’t miss out on your share of happiness!

FAQs:

1) What tax benefits do I get if I donate to GfG?

Donations made to all fundraisers under the Giving for Good Foundation are entitled to a 50% tax exemption. So, if your total taxable income is INR 300,000 and you donate INR 10,000 to GfG, you are eligible for a tax deduction of INR 5000 which brings your taxable income down to INR 295,000.

2) How do I receive my 80G certificate?

Once you have successfully donated through our official website, the certificate reaches you via email within a short period of time. In case of any issues, you can always write to us at hello@givingforgood.org. 

3) Can I as an NRI claim for tax deductions?

GfG currently does not provide 80G certificates to Non-resident Indian donors but, we appreciate all the help you are willing to give to make a difference in society and are constantly working to bring the provision to you.

Exclusively written for Giving for Good Foundation by Bhairavi Hiremath

Sources:

https://www.indiafilings.com/learn/guide-to-80g-certificate/

https://tax2win.in/guide/80g-deduction-donations-to-charitable-institutions

https://life.futuregenerali.in/life-insurance-made-simple/tax-hacks/blogs/section-80g-deduction/