Claiming Tax Deductions Under Section 80G and Section 80C in Your ITR Filing to Avoid Scrutiny

Claiming tax deductions under Section 80G and Section 80C is an effective way to reduce taxable income and maximize savings. However, making incorrect claims or failing to submit the necessary documentation can trigger scrutiny from the Income Tax Department. To avoid such issues, it’s essential to understand the requirements of these deductions and ensure accuracy in your ITR filing. Let us explore the process of claiming these deductions while minimizing the risk of errors that could attract attention.

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Table of Contents

• How to claim tax deductions under section 80g and 80c?

• Understanding Section 80C Deductions

• Eligible Investments and Expenses Under Section 80C

• Section 80G: Claiming Deductions for Donations

• How to Avoid Scrutiny for Section 80C and 80G Deductions

• Steps to Properly Claim Section 80C and Section 80G Deductions in Your ITR

• How TaxBuddy Can Help with Section 80C and 80G Compliance

• Conclusion

• FAQs

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How to claim tax deductions under section 80g and 80c?

To claim tax deductions under Section 80C and Section 80G, you must first ensure that your investments and donations meet the criteria specified by the Income Tax Department. Under Section 80C, eligible investments such as PPF, EPF, NSC, life insurance premiums, and tuition fees for children allow deductions up to ₹1.5 lakh per financial year. For Section 80G, deductions are available for donations made to approved charitable institutions, with the deduction being either 50% or 100% of the donated amount, depending on the organization. To claim these deductions, fill in the appropriate sections of your ITR, provide proof of investment or donation, and ensure the details match the records in Form 26AS. If you are filing under the old tax regime, you can avail of both these deductions, but they are not available under the new tax regime.

Understanding Section 80C Deductions

Section 80C is one of the most popular tax-saving provisions under the Income Tax Act, designed to encourage savings and investments. It allows individuals and Hindu Undivided Families (HUFs) to claim a deduction of up to ₹1.5 lakh per financial year for eligible investments and expenses. This deduction helps in reducing taxable income, thus lowering the overall tax liability. The scope of Section 80C covers various financial instruments and expenses that promote long-term financial security, such as contributions to retirement funds and insurance premiums. The eligible deductions can be used for a variety of purposes, including securing a child’s education, saving for retirement, or paying off home loans. To claim the benefit under this section, taxpayers must provide proof of the investments or expenses incurred during the financial year.

Eligible Investments and Expenses Under Section 80C

Section 80C covers a wide range of investment options, including both long-term savings and insurance products. The maximum deduction that can be claimed under this section is ₹1.5 lakh in a given financial year, which is inclusive of all eligible investments and expenses. Some common eligible investments and expenses under Section 80C include:

1. Employee Provident Fund (EPF) – Contributions to EPF made by both employees and employers qualify for deductions.

   
   

2. Public Provident Fund (PPF) – Contributions to a PPF account are eligible for deductions, providing a long-term saving option.

   
   

3. Equity-Linked Savings Scheme (ELSS) – These are mutual funds that invest in equities, offering tax benefits while also providing potential for high returns.

   
   

4. National Savings Certificate (NSC) – Investments in NSC are eligible for deductions and also help in building a fixed return over time.

   
   

5. Life Insurance Premiums – Premiums paid for life insurance policies for self, spouse, or children are deductible under this section.

   
   

6. Principal Repayment on Home Loan – Payments made toward the principal repayment of a home loan qualify for deductions under Section 80C.

   
   

7. Tuition Fees for Children – Tuition fees paid for up to two children in India are eligible for tax deductions under Section 80C.

Each of these items comes with its own eligibility criteria and documentation requirements, which should be retained to substantiate claims.

Section 80G: Claiming Deductions for Donations

Section 80G provides deductions for donations made to charitable institutions, promoting social welfare and charity. The deductions are available for donations made to both approved and specified institutions, including public charitable trusts, funds, and NGOs. The amount of deduction under Section 80G can vary, depending on the organization and whether the donation is subject to restrictions. Donations made to certain institutions qualify for a 100% deduction, while others qualify for a 50% deduction.

However, there are important conditions to be met:

• Donations above ₹2,000 must be made through non-cash methods (e.g., cheque, bank transfer, or online payment).

  
  

• The donor must obtain a receipt or certificate from the donee organization with details such as the name, PAN, and the amount donated.

  
  

• The total deduction under Section 80G is subject to a maximum limit of 10% of the donor’s adjusted gross total income.

To claim this deduction, the donor needs to enter the necessary details in their ITR, including the name, PAN, and the amount donated, ensuring that the donation is made to a recognized institution.

How to Avoid Scrutiny for Section 80C and 80G Deductions

To avoid scrutiny from the Income Tax Department, it is essential to follow a few important guidelines when claiming deductions under Section 80C and Section 80G. Here are the key points to keep in mind:

1. Proper Documentation: Always retain original receipts, certificates, and proof of investment for all Section 80C and 80G claims. For donations under Section 80G, keep donation receipts that include the donee’s name, PAN, and donation details.

   
   

2. Cross-Check with Form 26AS and AIS: Ensure that all income and TDS details in your ITR match the records in Form 26AS and the Annual Information Statement (AIS). Mismatched information can attract scrutiny.

   
   

3. Avoid Inflated Claims: Never overstate the deduction amounts. Only claim deductions for amounts that you have actually invested or donated. Any overstatement could lead to penalties or the disallowance of the claims.

   
   

4. Timely Submission: Submit your ITR on time and provide all supporting documents when required. Delayed filings or non-submission of requested documents can trigger the attention of tax authorities.

   
   

5. Correct Tax Regime: Deductions under Section 80C and 80G are only available if you choose the old tax regime. If you opt for the new tax regime, these deductions are not applicable.

   
   

6. Respond to Notices: If the Income Tax Department raises a notice or queries regarding your claims, promptly respond with all the requested documents and clarifications.

Steps to Properly Claim Section 80C and Section 80G Deductions in Your ITR

Claiming Section 80C and Section 80G deductions in your Income Tax Return (ITR) is a straightforward process if done correctly. Follow these steps to ensure proper filing:

1. Gather All Documents: Ensure you have all the necessary documents like receipts for donations and proof of investments such as PPF receipts, insurance policies, and tuition fee payments.

   
   

2. Choose the Correct Tax Regime: Deductions under Section 80C and Section 80G are available only under the old tax regime. If you are opting for the new tax regime, these deductions cannot be claimed.

   
   

3. Enter Deduction Details in the ITR Form: In the relevant sections of your ITR form, enter the details of the deductions you are claiming under Section 80C and Section 80G. This includes investment amounts for 80C and donation amounts along with the donee’s details for 80G.

   
   

4. Cross-Verify with Form 26AS: Before submitting your ITR, cross-check your claimed amounts with the details in Form 26AS to ensure there are no discrepancies between your records and the tax department’s records.

   
   

5. Submit the Return and Keep a Copy: Once everything is filled out correctly, submit your ITR. Keep a copy of the acknowledgment for your records in case it is needed for future reference.

How TaxBuddy Can Help with Section 80C and 80G Compliance

TaxBuddy is an excellent platform for ensuring compliance with Section 80C and 80G deductions. The app simplifies the process of tax filing by:

1. Tracking Eligible Investments and Donations: TaxBuddy keeps track of your investments and donations, reminding you about eligible claims and helping you gather the necessary documents.

   
   

2. Providing Expert Assistance: TaxBuddy offers expert guidance to ensure that you claim only the correct deductions and comply with tax regulations. This helps you avoid common mistakes and ensures your deductions are not disallowed.

   
   

3. Easy ITR Filing: TaxBuddy’s platform auto-fills your ITR based on the correct deductions, reducing the risk of errors and simplifying the filing process.

   
   

4. Cross-Verification with Form 26AS: TaxBuddy ensures that your claims are verified with Form 26AS, helping you cross-check the details before filing your return.

   
   

5. Real-Time Tracking: The app provides real-time tracking of your refund status and allows you to stay informed about any notices or updates from the Income Tax Department.

Conclusion

Claiming tax deductions under Section 80C and Section 80G can significantly reduce your taxable income, but it is essential to do so accurately to avoid scrutiny from the Income Tax Department. By keeping proper documentation, cross-checking your claims with Form 26AS, and following the correct process, you can ensure that your deductions are valid and your tax filings remain compliant. For anyone looking for assistance in tax filing, I highly recommend you download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

1. Can I claim both Section 80C and 80G deductions in the same year?

Yes, you can claim both Section 80C and Section 80G deductions in the same year, provided you meet the eligibility criteria for both. Section 80C covers deductions for investments like PPF, EPF, ELSS, and life insurance premiums, while Section 80G covers donations made to charitable institutions. Ensure that you have all the necessary proof for both categories of claims, such as receipts for donations and certificates for investments.

2. What happens if I claim a deduction without proof?

If you claim a deduction under Section 80C or Section 80G without having the appropriate supporting documents (like investment proof or donation receipts), your claim may be disallowed during assessment. This can lead to an increase in your tax liability and may invite scrutiny or penalties from the Income Tax Department.

3. Are these deductions available under the new tax regime?

No, deductions under Section 80C and Section 80G are not available if you opt for the new tax regime. The new tax regime offers lower tax rates but removes the option for most deductions, including those under Sections 80C and 80G. If you wish to avail these deductions, you must choose the old tax regime while filing your Income Tax Return (ITR).

4. How do I enter donation details in my ITR?

To claim a deduction under Section 80G for donations, you need to provide the following details in the relevant section of your ITR:

• Name and address of the donee (charitable institution).

• PAN of the donee (if applicable).

• Amount donated, clearly distinguishing between cash and non-cash donations.

• Relevant clause under which the deduction is being claimed. This ensures that the donation is processed correctly by the Income Tax Department.

  
  

5. What is the maximum deduction limit under Section 80C?

The maximum deduction limit under Section 80C is ₹1.5 lakh per financial year. This limit is applicable for the total deductions claimed from eligible investments and expenses like EPF, PPF, ELSS, life insurance premiums, and others combined. It is important to ensure that you do not exceed this limit, as any excess amount will not be eligible for a deduction.

6. Can I claim deductions for donations made to religious organizations under Section 80G?

Donations made to religious organizations are generally not eligible for deductions under Section 80G, unless the religious institution is specifically approved by the Income Tax Department. However, if the institution meets the required criteria, you can claim a deduction, but the deduction may be subject to restrictions. Always check if the donee organization is approved under Section 80G before claiming the deduction.

7. Is it necessary to make donations through cheque or bank transfer for 80G claims?

Yes, donations above ₹2,000 must be made through traceable methods such as cheque, bank transfer, or digital payment. Cash donations exceeding ₹2,000 will not qualify for a deduction under Section 80G. It’s important to ensure that the donation is made in a non-cash mode and that you have the necessary proof of payment, such as bank statements or receipts, to support your claim.

8. Can I claim deductions for tuition fees under Section 80C?

Yes, tuition fees paid for the education of your children are eligible for deductions under Section 80C. However, this applies only to tuition fees paid for full-time education in India. The deduction is available for up to two children and is subject to the overall ₹1.5 lakh limit under Section 80C. Keep receipts of the tuition fees paid as proof for claiming the deduction.

9. What is the percentage of deduction available for donations under Section 80G?

The percentage of deduction available under Section 80G depends on the organization to which the donation is made. Donations to certain institutions are eligible for a 100% deduction, while others are eligible for a 50% deduction. Additionally, some donations may be subject to restrictions based on the income of the donor. It’s essential to check the relevant clause under which the deduction is being claimed and the nature of the donee organization.

10. What documents should I retain for claiming Section 80C deductions?

For claiming Section 80C deductions, you should retain the following documents as proof of your investments:

• PPF and EPF passbooks/statements.

• Premium receipts for life insurance policies.

• Receipts for contributions to ELSS, NSC, or tax-saving fixed deposits.

• Loan repayment certificates for the principal portion of home loans.

• Tuition fee receipts for children’s education.

These documents should be kept safely in case the Income Tax Department requests them for verification.

11. How does TaxBuddy assist in claiming Section 80C and 80G deductions?

TaxBuddy simplifies the process of claiming Section 80C and 80G deductions by providing expert guidance and automated tools. The app helps you track your eligible investments and donations, ensures that all necessary documentation is in place, and assists you in filling out your ITR accurately. It also cross-checks your claims with the Income Tax Department’s records and provides reminders for upcoming filing deadlines.

12. Can I revise my ITR if I make a mistake in claiming deductions?

Yes, if you realize that you have made a mistake in claiming deductions under Section 80C or Section 80G, you can file a revised return. The revised return allows you to correct any errors or omissions in your original ITR. It’s important to file the revised return before the end of the relevant assessment year, or before the time limit for revising your return expires.