The 80g deduction is a tax benefit under the indian income tax act, which allows donors to claim a deduction on their taxable income for donations made to eligible charitable institutions or trusts. Here’s a comprehensive guide to understanding the 80g deduction and maximizing its benefits:
- Eligibility: only donations made to specified institutions and funds are eligible for an 80g deduction. The list of eligible institutions and funds is available on the income tax department’s website. It’s essential to ensure that the institution or fund is registered under section 80g before making a donation.
- Amount of deduction: the amount of deduction allowed under section 80g varies based on the type of institution or fund. Donations made to specific funds and institutions are eligible for 100% deduction of the donated amount, while donations made to others are eligible for a 50% deduction. The maximum amount of deduction that can be claimed under section 80g is 10% of the donor’s gross total income.
- Modes of payment: donations can be made in cash or through other modes such as cheques, demand drafts, or online payments. It’s essential to obtain a receipt for the donation made, specifying the name of the donor, the amount donated, and the name of the charitable institution or fund.
- Documentation: to claim an 80g deduction, the donor must submit a copy of the receipt obtained for the donation made. If the donation is made through an online payment mode, a copy of the transaction statement can be submitted. The receipt must be in the name of the donor, and the donation amount must be clearly mentioned.
- Maximum benefits: to maximize the benefits of the 80g deduction, donors can choose to donate to eligible institutions or funds that qualify for a 100% deduction. Additionally, they can also donate the maximum amount allowed under section 80g, which is 10% of their gross total income.
- Filing tax returns: to claim the 80g deduction, the donor must file their income tax returns within the specified due date. They must provide details of the donation made, including the name of the charitable institution or fund, the amount donated, and the receipt number.
In conclusion, the 80g deduction is an excellent way for donors to support charitable causes while also reducing their taxable income. By following the guidelines mentioned above, donors can maximize the benefits of the 80g deduction while contributing to society.
