Income Tax - Deduction from GTI u/s 80G

 

Deduction in respect of donations to certain Funds, Charitable Institutions, etc. [Section: 80G]

 

Part A: Discussion of provisions of  Section 80G of the Income Tax Act, 1961 in regard to deduction in respect of donations to certain funds, charitable institutions, etc. and explanations of steps for computation of such deduction along with the necessary tables for such computation.

Part B: Three illustrations with solutions.

 

Part A

1.             Deduction u/s 80G is available to any taxpayer (individual, firm, company or any other person).

2.             Donations made to foreign trusts do not qualify for deduction u/s 80G.

3.             Donations made to political parties for any reason, including paying for brochures, souvenirs or pamphlets brought out by such parties do not qualify for deduction u/s 80G. However deduction for contribution (other than cash contribution) to political parties can be claimed u/s 80GGB / 80GGC.

4.             All donations are not eligible for tax benefits. Tax benefits can be claimed only on specific donations i.e. those made to prescribed funds and institutions.

5.             No deduction shall be allowed u/s 80G in respect of any donation unless such donation is of a sum of money. In other words, donation made in kind shall not be eligible for deduction u/s 80G.

6.             No deduction shall be allowed u/s 80G in respect of donation of any sum exceeding Rs 2,000 unless such sum is paid by any mode other than cash. In other words, for availing deduction u/s 80G, donation of any sum exceeding Rs 2,000 should be given by cheque or draft but not in cash.

7.             Deduction u/s 80G shall be computed as follows:

 

Notes:

1.             Section 111A covers STCG arising from the transaction of sale of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund, where such transaction is    chargeable to securities transaction tax.

2.             Section 115A covers tax on dividends, royalty and technical service fees in the case of foreign companies.

3.             Section 115AB covers tax on income from units purchased in foreign currency or capital gains arising from their transfer.

4.             Section 115AC covers tax on income from bonds or Global Depository Receipts (GDR) purchased in    foreign currency or capital gains arising from their transfer.

5.             Section 115AD covers tax on income of Foreign Institutional Investors (FII) from securities or capital gains arising from their transfer.

 

List of donees and corresponding percentages of deduction u/s 80G (1)

	Donee	%	%
1	The National Defence Fund set up by the Central Government		100
2	The Jawaharlal Nehru Memorial Fund referred to in the Deed of Declaration of Trust adopted by the National Committee at its meeting held on the 17-08-1964	50
3	The Prime Minister's Drought Relief Fund	50
4	The Prime Minister's National Relief Fund		100
5	The Prime Minister's Armenia Earthquake Relief Fund		100
6	The Africa (Public Contributions India) Fund		100
7	The National Children's Fund		100
8	The Indira Gandhi Memorial Trust, the deed of declaration in respect whereof was registered at New Delhi on the 21st February, 1985	50
9	The Rajiv Gandhi Foundation, the deed of declaration in respect whereof was registered at New Delhi on the 21st June, 1991	50
10	The National Foundation for Communal Harmony		100
11	A University or any educational institution of national eminence as may be approved by the prescribed authority in this behalf		100
12	The Maharashtra Chief Minister's Relief Fund during the period beginning on the 1st October, 1993 and ending on the 6th October, 1993 or to the Chief Minister's Earthquake Relief Fund, Maharashtra		100
13	Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat		100
14	Any Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district for the purposes of improvement of primary education in villages and towns in such district and for literacy and post-literacy activities		100
15	The National Blood Transfusion Council or to any State Blood Transfusion Council which has its sole object the control, supervision, regulation or encouragement in India of the services related to operation and requirements of blood banks		100
16	Any fund set up by a State Government to provide medical relief to the poor		100
17	The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants		100
18	The Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996		100
19	The National Illness Assistance Fund		100
20	The Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Union territory, as the case may be		100
21	The National Sports Fund to be set up by the Central Government		100
22	The National Cultural Fund set up by the Central Government		100
23	The Fund for Technology Development and Application set up by the Central Government		100
24	The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities constituted u/s 3(1) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999		100
25	The Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility u/s 135(5) of the Companies Act, 2013		100
26	The Clean Ganga Fund, set up by the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility u/s 135(5) of the Companies Act, 2013		100
27	The National Fund for Control of Drug Abuse constituted u/s 7A of the Narcotic Drugs and Psychotropic Substances Act, 1985		100
28	Any other fund or any institution to which this section applies [i.e. Public Charitable Institution u/s 80G(5)]	50
29	The Government or any local authority, to be utilised for any charitable purpose other than the purpose of promoting family planning	50
30	An authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both	50
31	Any corporation as per clause (26BB) of section 10	50
32	The Government or to any such local authority, institution or association as may be approved in this behalf by the Central Government, to be utilised for the purpose of promoting family planning		100
33	Any sums paid by the assessee in the previous year as donations for the renovation or repair of any such temple, mosque, gurdwara, church or other place as is notified by the Central Government in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States	50
34	Any sums paid by the assessee, being a company, in the previous year as donations to the Indian Olympic Association or to any other association or institution established in India, as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf for— (i)                       The development of infrastructure for sports and games; or (ii)                    The sponsorship of sports and games, in India		100
35	Any sums paid by the assessee, during the period beginning on the 26th January, 2001 and ending on the 30th September, 2001, to any trust, institution or fund to which this section applies for providing relief to the victims of earthquake in Gujarat		100

 

Section 80G (5)

This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of subsection (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely:—

i.   Where the institution or fund derives any income, such income would not be liable to inclusion in     its total income under the provisions of sections 11 and 12 or clauses (23AA)/ (23C) of section 10:

      Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if-

(a)     The institution or fund maintains separate books of account in respect of such business;

(b)     The donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business, and

(c)     The institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;

ii.  The instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;

iii.  The institution or fund is not expressed to be for the benefit of any particular religious community or caste;

iv. The institution or fund maintains regular accounts of its receipts and expenditure;

v.  The institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India or u/s 25 of the Companies Act, 1956, or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority;

vi. In relation to donations made after 31^st March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf, and

vii. Where any institution or fund had been approved under clause (vi) for the previous year beginning on 1^st April, 2007 and ending on 31^st March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been —

(a)     Established for charitable purposes for the previous year beginning on 1^st April, 2008 and   ending on 31^st March, 2009, and

(b)     Approved under the said clause ‘vi’ for the previous year beginning on 1^st April, 2008 and ending on 31^st March, 2009.

 

EASY AND SIMPLE WAYS TO REMEMBER THE KEY POINTS

List of donees w.r.t. each of which 50% of the donation is allowed for deduction u/s 80G:

1.             Jawaharlal Nehru Memorial Fund.

2.             Prime Minister’s Drought Relief Fund.

3.             Indira Gandhi Memorial Trust.

4.             Rajiv Gandhi Foundation.

5.             Public Charitable Institution u/s 80G (5).

6.             Government or any local authority (amount of donation to be utilised for any charitable purpose OTHER THAN THE PURPOSE OF PROMOTING FAMILY PLANNING).

7.             Authority for satisfying the need of housing accommodation or for planning, development or improvement of cities, towns and villages.

8.             Any corporation established by the Central Government or any State Government for promoting the interest of the members of a minority community.

9.             Donation to a notified place of public worship i.e. temple, mosque, gurdwara, church, etc. notified by the Central Government.

 

Note:

With respect to all other donees u/s 80G 100% of the donation is allowed for deduction.

 

List of donees w.r.t. which total amount of donations eligible for deduction are restricted to the ceiling of 10% of adjusted GTI u/s 80G:

1.             Public Charitable Institution u/s 80G (5).

2.             Government or any local authority (amount of donation to be utilised for any charitable purpose OTHER THAN THE PURPOSE OF PROMOTING FAMILY PLANNING).

3.             Authority for satisfying the need of housing accommodation or for planning, development or improvement of cities, towns and villages.

4.             Any corporation established by the Central Government or any State Government for promoting the interest of the members of a minority community.

5.             Donation to a notified place of public worship i.e. temple, mosque, gurdwara, church, etc. notified by the Central Government.

6.             Government or any approved local authority, institution or association (amount of donation to be utilised FOR THE PURPOSE OF PROMOTING FAMILY PLANNING).

7.             Indian Olympic Association or any other specified association or institution established in India for the development of infrastructure for sports and games or for the sponsorship of sports and games in India, donations being made by a Company.

 

Part B

 

Illustration: 1

Mr. Shiva, aged 58 years, has gross total income of Rs 7, 75,000 comprising of income from salary and house property. He has made the following payments and investments:

i.                  Premium paid to insure the life of his major daughter (policy taken on 1.4.2016 and the policy value was Rs 1, 80,000) – Rs 20,000.

ii.                Medical insurance premium for self – Rs 12,000 and for spouse – Rs 14,000.

iii.             Donation to a public charitable institution registered under 80G Rs 50,000 by way of cheque.

iv.           LIC Pension Fund – Rs 60,000.

v.             Donation to National Children’s Fund – Rs 25,000 by way of cheque.

vi.           Donation to Jawaharlal Nehru Memorial Fund – Rs 25,000 by way of cheque.

vii.        Donation to approved institution for promotion of family planning – Rs 40,000 by way of cheque.

viii.      Deposit in PPF – Rs 1, 00,000.

 

Compute the total income of Mr. Shiva for A. Y. 2020 – 21.

 

Solution: 1

Illustration: 2

Compute total income for the A.Y.2020-21 of Miss Dipika, a resident individual, from the following details:

Solution: 2

Illustration: 3

Mr. R Mukherjee furnished the following information for the previous year 2019-20:

1.       Donation to Prime Minister’s National Relief Fund Rs 15,000;

2.       Donation to Jawaharlal Nehru Memorial Fund Rs 10,000;

3.       Donation to a notified temple Rs 30,000;

4.       Donation of cloth worth Rs 10,000 to Bharat Sevashram Sangha to be distributed among Ayla victims;

5.       Donation to an ‘Approved University’ Rs 2,000;

6.       Gross Total Income Rs 3,00,000;

7.       Payment of life insurance premium on the life of her daughter Rs 20,000 (Policy value Rs 2, 00,000).

 

Compute total income.

 

Solution: 3