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Donations and their impact on tax

If you make any donations to certain qualified institutions or causes, you can claim a tax benefit on the donated amounts. Depending on the receiver of the donation, your donation would qualify under any one of the three sections of the Income Tax Act - 80 G, 80 GGA, and 80 GGC.

Section 80 G

As per section 80 G, you can claim tax deductions on investments made to select funds, government schemes, charities, NGOs, etc.

Donations to certain institutions are eligible for a 100 per cent deduction with no upper limit on the amount. Example of such institutions are the Prime Minister's National Relief Fund, National Defence Fund, The Army Central Welfare Fund, and National Foundation for Communal Harmony, etc.

For certain donations, you can claim up to 50 per cent of the donated amount for tax benefits. Again there is no upper limit on the amount. These schemes are the PM Drought Relief Fund, National Children's Fund, Indira Gandhi Memorial Trust, and Rajiv Gandhi Foundation.

There is a third category of donations, which allow a deduction of either 100 per cent or 50 per cent of donated amounts. However, for this category, the donation cannot be more than 10 per cent of gross income. An example is money donated to the Indian Olympic Association.

Section 80 GGA

As per section 80 GGA, any donations made towards scientific research or rural development are eligible for a tax deduction. An example is a donation made to a college or university, which conducts scientific research. Another example is a donation made to a fund created by the Government of India for rural development. However, the institute should be in the list of institutions recognized by the Income tax department. You can deduct 100 per cent of the donated amount from your taxable income. Note that benefits of section 80 GGA are not available to individuals generating income through business.

Section 80 GGC

As per section 80 GGC, donations made to political parties are eligible for a 100 per cent deduction. But, the payments should be made through banks and not by cash. For example, if you donate ₹50,000 to a political party, you can deduct the entire amount from your taxable income.

How to claim the tax benefits of donations?

For tax purposes, you can claim only monetary donations, and not donations given in kind. The maximum amount of cash donations allowed is ₹10,000 (except 80 GGC where no cash donations are allowed). To claim tax benefits of donation, you need to produce a certificate or a stamped receipt from the receiving trust/NGO. The receipt should have details of the trust, amount donated, name of the donor, and the trust's registration number as provided by the income tax department.

Use iCalculators India tax calculator to see how donations made to qualified institutions affect your tax payable.

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