All You Need To Know About 80g Income Tax

Taxation is a significant source of revenue for governments. The government collects taxes from individuals and companies through various means. Tax exemptions and deductions are ways to reduce or eliminate the amount of taxes taxpayers pay.

“Section 80G income tax ” is a part of the Income Tax Act 1961 (ITA), which provides certain tax reliefs to donors. 

Section 80G has three parts – 80G(1), 80G(2) and 80G(3).

This part provides tax exemption on donations received by registered charitable institutions. This part also allows deduction of expenditure incurred by such institutions.

This part provides tax deductions on donations received by unregistered charities. Donations can be made through cash, the gift in kind or other assets.

The donor can claim the benefit of this part if: 

1. they make donations to any eligible institution;
2. the amount of donation exceeds Rs.10,000;
3. the total benefit claimed is more than 50% of their taxable income in that year; 4. they claim the benefit within two years of making the donation; 5. he/she pay tax at least once during those two years.

Exemption under Section 80G:

If a person donates property to any charitable institution which qualifies as a “donor-eligible entity”, then the same becomes exempt from taxation. The donated property includes land, building, structure, machinery, plant, equipment etc.

Eligible Institution:

An eligible institution is an institution whose primary purpose is social service or educational purposes. Eligible Institutions include Public Charitable Trusts, Medical Research Institutes, Religious Tract Societies, Libraries, Museums, National Archives, Archaeological Survey Agencies etc.

Conditions for receiving tax exemption

Individuals can donate their property either to Registered or Unregistered Charities. 

However, they cannot claim the benefit of both sections simultaneously. Individuals can do so only after completing five conditions specified hereunder:

1. To donate property worth more than Rs.5 lakh;
2. To donate to charitable, religious, missionary / propagating activities;
3. To donate in the name of a specific project (e.g., medical care or education);
4. To make the donation from its own resources without recourse to third parties;
5. To pay the full rate of excise duty and registration fees when required.

These conditions will act as eligibility criteria for claiming the above-mentioned tax reliefs. Deduction under Section 80G(II): Deduction 

Section 80G Deduction (II) is allowed for expenditure incurred by registered charitable institutions and not allowed where expenditure is incurred by unregistered ones. If a person donates his properties in the form of cash or gifts in kind, there are no deductions available under both these sections.

In order to avail of the benefit of this section, the taxpayer must fulfill all of the following conditions:

1. The donated property shall be used in the manner intended when it was given or transferred to the eligible institution;
2. It shall be used exclusively for the purpose stated in Part I of Schedule VI;
3. No material gain shall accrue to the taxpayer as a result of the disposition of the donated property;
4. The amount of donation does not exceed 5 per centum of the total value of the donated property;
5. Any deduction claimed shall have been allowed prior to donating the property to the eligible institution;

  Wrapping up

As per Income Tax Act 1961, every citizen has an obligation to file an Income Tax Return if he earns more than the threshold limit of INR 10 Lakhs in a year. Section 80G allows taxpayers to deduct the entire cost of property donated to charities as long as the donor fulfils the aforementioned criteria. Taxpayers should note that this section only applies to donations made before March 31st, 2015.