ITR filing: Select donations qualify for tax benefits, say analysts

The pandemic saw people donating to funds and charitable organisations working for Covid-19-related causes, like PM CARES Fund and non-governmental organisations that took care of Covid orphans. Many adopted unconventional means to donate, like using their reward points to supply oxygen cylinders to the needy. While filing your income-tax (I-T) returns, you can enjoy tax benefits on the amount donated under two Sections of the I-T Act.   

Section 80G

Vivek Jalan, partner, Tax Connect Advisory Services, says, “An individual, firm, company or any other person, including non-resident Indians, can claim deduction under Section 80G.”

Depending on the nature of the donation, a deduction can be claimed either up to 100 per cent of the donation (say, a donation to the PM CARES Fund) or 50 per cent (say, a donation to a Section 80G-registered charity). In some cases, the deduction that can be claimed on donations is limited to 10 per cent of the adjusted gross total income of the taxpayer.

 Gopal Bohra, partner, N.A. Shah Associates, says, “The taxpayer, while identifying the institution to which he wishes to donate, should be aware that some donations cannot exceed 10 per cent of his adjusted gross total income. If his donations are likely to exceed this level, he should identify donations that are allowed without any such restriction, for example, to the PM CARES Fund.”

In short, donations to some specified funds are eligible for 100 per cent or 50 per cent deduction without any limit linked to the qualifying amount.

However, donations to other charitable organisations are allowed a deduction of 100 per cent or 50 per cent of the amount donated, or 10 per cent of the adjusted total income, whichever is lower. Donations in kind (say, of laptop, food packets, clothes, etc.) or cash donations exceeding ~2,000 are not eligible for deduction. Experts say donations in the form of credit card reward points also do not qualify for a deduction.

Section 80GGA

An assessee, who does not have any income taxable under the head ‘profits and gains of business or profession’ is allowed to claim deduction under Section 80GGA on the amount contributed to specified associations, such as donations made towards scientific research or rural development.  

Kapil Rana, founder and chairman, HostBooks, says, “Donations can be made via a cheque, bank draft, any digital mode, or in cash. However, cash contribution can’t exceed ~10,000, otherwise it will not qualify for deduction under Section 80GGA.”

For an eligible deduction, the whole amount donated can be claimed. Rana adds, “If a deduction has been claimed under this Section, then no deduction shall be allowed on any payment specified under this Section under any other provision of the I-T Act.”  

Things to keep in mind

Donors need to select the appropriate mode while making donations under these two Sections. 

 Naveen Wadhwa, deputy general manager, Taxmann, says, “Deduction can be claimed under Section 80G only on donations made via cash or cheque. On the other hand, deduction under Section 80GGA can be claimed on donations made in any form — cash, cheque or kind.”  

 He should make sure that deduction under Section 80G is disclosed in the appropriate column — 100 per cent or 50 per cent deduction, and with or without restriction.

 Bohra says, “If a person has income under the head ‘profit or gains from business or profession’, he should claim deduction under Section 35AC and not under Section 80GGA.”

 Finally, fill in all the details carefully. In case of errors, the I-T department could disallow these deductions.