Difference Between Section 80C and Section 80G Deductions under Indian Income Tax Act, 1961

Tax deductions play a pivotal role in reducing the taxable income of individuals, thereby lowering their overall tax liability. In India, Sections 80C and 80G of the Income Tax Act, 1961, offer taxpayers significant opportunities to save on taxes by making investments or donations. While both sections provide relief, they differ in their purpose, eligibility, and the nature of the deductions they allow. Section 80C primarily encourages savings and investments, while Section 80G incentivizes charitable giving. Understanding the differences and optimizing the use of both sections can help taxpayers effectively plan their finances and minimize their tax burden.

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Table of Contents

• Difference Between Section 80C and Section 80G Deductions

• Purpose and Nature of Deductions

• Deduction Limits and Calculation

• Eligible Investments/Expenses vs Eligible Donations

• How to Claim the Deductions

• Impact on Taxable Income

• How 80C and 80G Work in Different Tax Regimes

• FAQs

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Difference Between Section 80C and Section 80G Deductions

To help taxpayers understand the differences between Section 80C and Section 80G of the Income Tax Act, 1961, here’s a comparative table that clearly highlights their purpose, eligibility, and benefits.

Aspect	Section 80C	Section 80G
Purpose	Tax deduction on savings, investments, and expenses	Tax deduction on donations to charitable organizations
Maximum Deduction Limit	₹1,50,000 per year (for FY 2025-26)	Varies: 50% or 100% of donation amount (with some caps)
Eligible Items/Expenses	- Employee Provident Fund (EPF) - Public Provident Fund (PPF) - Life insurance premiums - Tuition fees - Principal repayment on home loans - Sukanya Samriddhi Yojana - Equity Linked Savings Scheme (ELSS)	- Donations to National Relief Fund - Prime Minister’s National Relief Fund - Contributions to approved charitable institutions - Donations for scientific research or rural development
Eligibility	Available for individuals and Hindu Undivided Families (HUFs)	Available for individuals, HUFs, companies, and other taxpayers
Type of Deduction	Fixed deduction limit of ₹1,50,000 per year	Percentage-based deduction (50% or 100% of the donation amount)
Carry Forward of Deduction	Not allowed	Not allowed
Claiming Procedure	Claim by submitting proof of investment or expenses (e.g., receipts, certificates) while filing ITR	Claim by submitting proof of donation (e.g., receipt with PAN details) while filing ITR
Impact on Taxable Income	Direct reduction from taxable income up to ₹1,50,000	Deduction reduces taxable income based on the donation percentage (50% or 100%)
Application in Tax Regime	Not applicable in the new tax regime	Available under both old and new tax regimes

Key Takeaways:

1. Section 80C is focused on promoting long-term savings and investments, with a fixed deduction of ₹1,50,000 per year. It covers a wide range of financial products.

2. Section 80G, on the other hand, focuses on encouraging charitable donations, with the deduction varying between 50% and 100% based on the donation type and charity.

3. Section 80C is only available for individual taxpayers and HUFs, whereas Section 80G can be claimed by individuals, HUFs, and companies.

4. Both sections have clear, defined processes for claiming the deductions, but Section 80G is unique in allowing a reduction based on the percentage of the donation amount, which may exceed the limits defined in Section 80C.

   
   

Purpose and Nature of Deductions

Section 80C

1. Focus on Savings and Investments Section 80C is designed to promote long-term financial security by encouraging taxpayers to invest in specific financial instruments. It provides deductions on eligible investments such as Provident Funds (PF), life insurance premiums, and more. This section motivates individuals to save for retirement and other future financial goals.

   
   

2. Covered Expenses and Maximum Deduction The maximum deduction allowed under Section 80C is ₹1,50,000 per financial year. This amount includes all eligible investments and expenses, ensuring that taxpayers benefit from significant tax savings. Examples of covered expenses are contributions to Provident Funds, life insurance premiums, and tuition fees for children.

   
   

3. Applicability for Individuals and HUFs Section 80C is available to individuals as well as Hindu Undivided Families (HUFs), allowing them to claim deductions on eligible investments made during the financial year.

Section 80G

1. Focus on Charitable Donations Section 80G focuses on providing tax relief for donations made to charitable organizations or funds. It encourages philanthropy by allowing taxpayers to deduct a portion of the donation amount from their taxable income.

   
   

2. Deduction Limits and Eligibility Unlike Section 80C, the deduction under Section 80G varies based on the type of donation made. The deduction can range from 50% to 100% of the donation amount, depending on the eligibility of the recipient charity. There are also specific caps for certain donations, such as 10% of the adjusted gross total income.

   
   

3. Applicability for Individuals, HUFs, and Companies Section 80G allows deductions for individuals, HUFs, companies, and other taxpayers who contribute to charitable institutions or funds. This section is intended to foster charitable giving across all segments of society.

   
   

Deduction Limits and Calculation

Maximum Deduction Limit for Section 80C

Fixed ₹1,50,000 per Financial Year The maximum deduction available under Section 80C is ₹1,50,000 per financial year. This limit includes all eligible investments, and taxpayers can claim deductions for contributions to various specified schemes up to this amount.

Deduction Calculation for Section 80G

1. 50% or 100% of Donations, with Some Limits The deduction under Section 80G depends on the type of donation and the organization receiving the funds. Some donations may be eligible for a 100% deduction, while others may only qualify for 50%. Additionally, certain donations may be subject to caps, such as 10% of the adjusted gross total income for specific donations.

2. Influence of Donation Type on Deduction The exact deduction a taxpayer can claim under Section 80G depends on factors such as the nature of the donation and the recipient charity. This ensures that higher-value donations to recognized organizations receive more significant tax benefits.

   
   

Eligible Investments/Expenses vs Eligible Donations

Section 80C

Eligible investments and expenses under Section 80C include:

• Employee Provident Fund (EPF)

• Public Provident Fund (PPF)

• Equity Linked Savings Scheme (ELSS)

• Life insurance premiums

• Principal repayment of home loans

• Tuition fees for children

• Sukanya Samriddhi Yojana contributions

Section 80G

Eligible donations under Section 80G include:

• Donations to the National Relief Fund

• Donations to the Prime Minister’s National Relief Fund

• Contributions to other approved charitable organizations and funds

• Donations for scientific research, rural development, or other notified causes

How to Claim the Deductions

Claiming Deductions Under Section 80C

To claim deductions under Section 80C, taxpayers need to:

• Make the eligible investments or incur the eligible expenses within the financial year.

• Keep records of these investments, such as receipts, certificates, and bank statements.

• Claim the deduction while filing the Income Tax Return (ITR) for the respective financial year.

Claiming Deductions Under Section 80G

To claim deductions under Section 80G, taxpayers must:

• Ensure that the donation is made to a charitable organization or fund recognized by the Income Tax Department.

• Obtain a stamped receipt from the done, which includes the donor’s PAN and details of the donation.

• Claim the deduction while filing the ITR by submitting the donation receipts.

Impact on Taxable Income

Section 80C Impact

Direct Reduction in Taxable Income by ₹1,50,000

The deductions under Section 80C directly reduce the taxable income of a taxpayer by up to ₹1,50,000, thus lowering the overall tax liability. This can lead to significant savings, especially for taxpayers in higher income tax slabs.

Section 80G Impact

Percentage-Based Reduction in Taxable Income

The deductions under Section 80G reduce taxable income based on a percentage of the donation amount. Depending on the type of donation, the deduction can range from 50% to 100% of the donation amount. This allows taxpayers to claim tax relief on their charitable contributions, which may result in a lower tax liability.

How 80C and 80G Work in Different Tax Regimes

Is Section 80C Allowed in New Tax Regime?

Explanation of How 80C Works Under the New Tax Regime

Under the new tax regime, Section 80C benefits are not available for taxpayers opting for the reduced tax rates. Therefore, taxpayers who choose the new tax regime cannot claim deductions for investments made under Section 80C.

Is Section 80G Allowed in New Tax Regime?

Clarification of Whether Section 80G Benefits Are Available Under the New Regime

Unlike Section 80C, Section 80G deductions are still available under the new tax regime. Taxpayers opting for the new regime can continue to claim deductions for donations made to eligible charitable organizations.

Aspect	Section 80C	Section 80G
Purpose	Tax deduction on investments and expenses	Tax deduction on donations to charities
Maximum Deduction Limit	₹1,50,000 per year	Varies; 50% or 100% of donation amount
Eligible Items	EPF, PPF, ELSS, life insurance, tuition fees	Donations to approved charitable institutions
Claiming Procedure	Investment receipts, certificates	Donation receipt with donee details
Impact on Taxable Income	Direct reduction by ₹1,50,000	Percentage-based reduction based on donation

FAQs

Q1. What is the maximum deduction under Section 80C for FY 2025-26? 

The maximum deduction under Section 80C for the financial year 2025-26 is ₹1,50,000. This limit applies to a variety of eligible investments and expenses, including Provident Funds, life insurance premiums, tuition fees, and home loan principal repayments.

Q2. Can I claim both Section 80C and 80G deductions in the same year? 

Yes, taxpayers can claim both Section 80C and Section 80G deductions in the same financial year. Section 80C pertains to savings and investments, while Section 80G applies to charitable donations. The deductions are separate and can be claimed independently.

Q3. Are donations made to foreign organizations eligible for Section 80G? 

Donations made to foreign organizations are generally not eligible for deductions under Section 80G. Only donations to Indian charitable organizations or funds approved by the Income Tax Department qualify for deductions.

Q4. Can Section 80C deductions be carried forward to the next financial year? 

No, Section 80C deductions cannot be carried forward to the next financial year. The deduction must be claimed within the same financial year in which the investment or expense is incurred.

Q5. How do I calculate the deduction under Section 80G for a donation to a charity? 

The deduction under Section 80G is calculated based on the percentage of the donation, which can be 50% or 100% of the donated amount. The exact percentage depends on the type of charitable organization and the specific donation. For instance, donations to certain relief funds may qualify for a 100% deduction, while others may qualify for 50%.

Q6. What proof is required for claiming Section 80C deductions? 

To claim deductions under Section 80C, taxpayers must keep proof of their investments and expenses, such as receipts, certificates, or bank statements. These documents should be submitted while filing the Income Tax Return (ITR).

Q7. How do the tax benefits of Section 80C and 80G compare to other tax-saving provisions? 

Both Section 80C and Section 80G provide significant tax-saving opportunities. Section 80C offers a fixed maximum deduction of ₹1,50,000 per year for a wide range of investments, while Section 80G incentivizes charitable donations with varying deduction percentages. Other tax-saving provisions like Section 80D (health insurance) and Section 80E (education loan interest) also offer deductions, but the benefits and eligibility criteria differ.

Q8. Can donations to religious organizations be claimed under Section 80G? 

Donations to religious organizations are generally not eligible for deductions under Section 80G, unless the donation is made to an organization that is registered as a charitable institution under the Income Tax Act. The donation must be for charitable purposes, not for religious activities.

Q9. Is there any difference in Section 80C deductions for individuals and HUFs? 

Section 80C deductions are available for both individuals and Hindu Undivided Families (HUFs). However, the total eligible deduction limit of ₹1,50,000 applies separately to each taxpayer or HUF. In the case of HUFs, the deduction is claimed by the family head on behalf of the family members.

Q10. How does Section 80G impact taxable income for individuals in the new tax regime? 

Section 80G deductions are still available in the new tax regime, unlike Section 80C, which is not applicable under this regime. Donations made to eligible charitable organizations can reduce the taxable income of individuals opting for the new tax regime, allowing them to avail of tax benefits.

Q11. Are there any special provisions for donations made to the Prime Minister’s Relief Fund under Section 80G? 

Donations made to the Prime Minister’s National Relief Fund are eligible for a 100% deduction under Section 80G. This means that the entire donation amount can be deducted from the taxable income, subject to other conditions like proper documentation.

Q12. How can I track my eligible donations for Section 80G deductions? 

To track eligible donations for Section 80G deductions, keep a record of all donation receipts. These receipts should include the PAN of the donee organization and the donation amount. You can also maintain a list of all donations made during the financial year to ensure that you claim the correct deduction while filing your tax returns.