What is Section 80G Donation Limit for Salaried Person
- Rashmita Choudhary
- 3 days ago
- 5 min read
Charitable contributions can be an effective strategy for tax savings. The Indian Income Tax Act encourages charitable contributions from taxpayers through several mechanisms. Taxpayers can claim deductions for gifts given to qualified charity organisations under Section 80G, which is one of the most often used provisions for this purpose. Understanding the restrictions and guidelines under Section 80G is crucial for salaried individuals who want to maximise their tax benefits and contribute to deserving causes. This article examines the differences in Section 80G donation caps for salaried individuals, outlining the requirements, deductions, caps, and associated tax ramifications.
Table of Contents
What is Section 80G of the Income Tax Act?
Donations to specific charity organisations or funds are deductible under Section 80G of the Income Tax Act. Both people and businesses can take advantage of the deduction. Donations to qualified organisations or funds are eligible for the section 80G deduction. Depending on the organisation or fund that received the donation under 80G, the deduction gets claimed up to 50% or 100% of the total amount provided.
Notably, not all contributions made under section 80G are deductible. Donations to specific funds or organisations are the only ones that qualify for the deduction. Therefore, it's crucial to confirm if the organisation or fund to which the donation is deemed qualifies for a Section 80G deduction. A receipt or 80G deduction limit certificate from the organisation or fund to which the donation went is required for the taxpayer to claim the deduction under section 80G. Also, if you have any income or losses from a business or profession, you will not be able to claim the deduction.
Types of Deductions Under Section 80G
Tax benefits are available for donations made to qualified organisations and trusts subject to specific guidelines. These contributions fit under four categories under Section 80G:
100% Deduction (No Limit):Â A 100% tax deduction with no donation cap is available to the Prime Minister's National Relief Fund, National Defence Fund, National Foundation for Communal Harmony, and National/State Blood Transfusion Council, among other organisations.
A 50% deduction with no cap: A 50% tax cut with no cap is available for contributions to trusts, such as the Prime Minister's Drought Relief Fund, the National Children's Fund, and the Indira Gandhi Memorial Fund.
100% Deduction (Limited to 10% of Adjusted Gross Total Income): Contributions to the Indian Olympic Association and local or government family planning programs are eligible for a 100% deduction. Notably, the deduction is only allowed up to 10% of the adjusted gross total income of the donor. Over this threshold, any sum is not deductible.
50% Tax Deduction (Up to 10% of Adjusted Gross Total Income): A 50% tax deduction is available for charitable contributions given to the federal government or local government. The maximum deduction is 10% of the adjusted gross total income of the person donating. Amounts over this cap are not deductible.
Impact of 80G Deduction on Taxable Income
A salaried person can efficiently lower their taxable income by claiming deductions under Section 80G. It increases savings and decreases the total tax obligation. If you gift Rs. 50,000 to a 50% qualifying NGO, the deduction will be Rs. 25,000, which will lower your taxable income by that sum.
Donation Limits for Salaried Persons Under Section 80G
The maximum amount that a salaried individual may donate under Section 80G is not a set amount. The maximum deduction amount for donations, however, is based on the taxpayer's gross adjusted total income.
Donations that are eligible for a 50% or 100% deduction may qualify as claimed with just 10% of your Adjusted Gross Total Income (AGTI). AGTI is your entire income, less losses from real estate and speculative business ventures, before you claim any deductions under Section 80G. For example, if your AGTI is Rs. 10,000,000, the highest donation amount that gets deducted is Rs. 1,00,000.
Your donation is not eligible for a Section 80G deduction in that fiscal year if it exceeds 10% of your AGTI.
Steps to Claim 80G Deductions as a Salaried Person
The steps to claim deductions under Section 80G as a salaried person are as follows:
Step 1: Examine the NGO's 80G certification. Ensure that the organisation possesses a current 80G certificate and get registered under Section 80G.Â
Step 2: Maintain documentation of the donation. Acquire a receipt that includes key details such as the donor's name, PAN, donation amount, and date, along with the NGO's 80G registration number.Â
Step 3: Ensure the right donation method. To claim a deduction, donate by cheque, demand draft, internet transfer, or any other non-cash method.
Step 4: Claim deduction in Income Tax Return. Include the donation amount under Section 80G in the deductions section of your income tax return.
Step 5: Attach the receipt, if necessary. The Income Tax Department may request proof of receipt during assessment, so keep it safe.
Benefits of Section 80G Deductions for a Salaried Person
Tax Savings: By claiming qualified deductions, you can lower your tax outlay.
Social Impact: Encourage groups and initiatives that strive to improve society.
Financial Planning: Include charitable contributions in your financial and tax planning.
Encourages Transparency: Nonprofits provide receipts, guaranteeing that donations can be tracked and held accountable.
Contentment of Giving Back: In addition to the monetary gains, charitable contributions instill a sense of social duty.
Conclusion
Section 80G provides salaried individuals with a reasonable chance to lower their taxable income while making a significant contribution to charitable causes. Although there isn't a set amount that gets donated, most donations can get deducted up to 10% of your adjusted gross total income, though there are rare exceptions that allow for a 100% deduction. Donate to organisations that qualify, keep accurate records, and budget your donations based on your income to get the most out of your contributions. In addition to reducing tax obligations, charitable giving is essential for advancing social welfare and responsible citizenship.
FAQ
Q1. How much deduction is allowed under Section 80G?
Individuals may claim a deduction under Section 80G on the amount provided to qualified organisations or funds up to 50% or 100% of the total amount donated, depending on the organisation or fund to which the donation went. Furthermore, only those taxpayers who choose to use the old tax regime are eligible to claim this Section 80G deduction.
Q2. Is there a fixed limit on donations under Section 80G?
No, although for the majority of donors, the deduction is just 10% of adjusted gross total income.
Q3. Can a salaried individual claim 100% deduction on all donations?
No, contributions to the Prime Minister's Natural Relief Fund (PMNRF) are the sole ones that count for an unlimited 100% deduction.
Q4. Are cash donations eligible for deductions?
Donations in cash over Rs. 2,000 are not accepted. Donations can only be made via digital transfer or check.
Q5. How can I save tax by donating to an NGO?
You can claim a tax credit of 50% or 100% of the amount donated, with or without a qualifying limit, if the NGO to which you have donated is qualified. However, the total deduction of such donations cannot exceed 10% of adjusted gross total income if the donation is within the qualifying limit.
Q6. How to check if an NGO is qualified for a deduction?
Verify whether the NGO has a current 80G certificate from the Income Tax Department.
Q7. Can I carry forward donations if they exceed the limit?
Usually not. Donations that exceed the 10% threshold cannot be claimed for tax purposes.
Q8. Do I need to submit my donation receipt to claim a deduction under Section 80G?
No, the receipt is not required when submitting an ITR. However, you must maintain it close at hand and secure so that it can be shown to the Assessing Officer during the assessment if necessary.
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