Deduction under Section 80G of Income Tax Act

If you’ve donated to a charitable organisation or plan to, it’s important to know that your generosity could help reduce your tax burden. Under Section 80G of the Income Tax Act, individuals, Hindu Undivided Families (HUFs), companies, and firms can claim tax deductions on donations made to eligible institutions. However, to claim these benefits correctly, it’s essential to understand the different deduction categories, applicable limits, and the documentation required.

Clarity on such deductions not only helps you optimise your tax savings but also plays a role when applying for financial products like personal loans. Lenders often evaluate your Income Tax Returns (ITRs) during the loan approval process, and a well-documented tax profile with claimed deductions can indicate better financial planning and enhance your creditworthiness.

In this article, we’ll simplify everything you need to know about Section 80G – including deduction categories, donation eligibility, tax limits, and how to claim the 80G deduction.

Related Read: Tax Benefits on Personal Loans: Deductions and Exemptions

What Is Section 80G?

Section 80G is a special provision in the Income Tax Act that allows taxpayers to claim a deduction on donations made to government-approved charitable institutions and relief funds. The deduction is available to all taxpayers, such as individuals, HUFs, firms, and companies, but only for donations to organisations with valid 80G registration.

Section 80G’s primary goal is to encourage philanthropy and support NGOs and institutions that contribute to the public good.

Under Section 80G Income Tax

Not all donations are eligible for a 100% deduction; some come with income-based limits. Section 80G classifies eligible donations into four main categories:

1. Donations with 100% Deduction (No Upper Limit)

These donations qualify for a full deduction with no income-based restriction.

Examples include:

• Prime Minister’s National Relief Fund
• National Defence Fund
• Swachh Bharat Kosh
• Clean Ganga Fund
• National Children’s Fund
• Army/Navy/Air Force Welfare Funds

2. Donations with 50% Deduction (No Upper Limit)

Here, you can claim 50% of the donated amount as a deduction, with no cap on income.

Examples include:

• Prime Minister’s Drought Relief Fund
• Jawaharlal Nehru Memorial Fund
• Indira Gandhi Memorial Trust
• Rajiv Gandhi Foundation

3. Donations with 100% Deduction (Subject to 10% of Adjusted Gross Total Income)

You can claim a full deduction up to 10% of your adjusted gross total income.

Examples include:

• Donations to promote family planning
• Contributions to the Indian Olympic Association

4. Donations with 50% Deduction (Subject to 10% of Adjusted Gross Total Income)

This is the most restricted category – only 50% of the donation, up to 10% of adjusted gross total income, can be claimed.

Examples include:

• Donations to local government bodies for general charitable purposes
• Public charitable trusts or approved NGOs
• Religious places notified by the government
• Minority welfare corporations

How to Calculate Deduction Under 80G

The deduction depends on both the donation type and the applicable limit:

• For donations without limits: Claim 100% or 50% of the donated amount.
• For capped categories: Calculate 10% of adjusted gross income, then apply 50% or 100% accordingly.

Example:
If your adjusted income is INR 6,00,000 and you donate INR 1,00,000 to a 50% deduction category with a 10% limit, your deduction will be INR 30,000 (lesser of INR 50,000 and INR 60,000).

Donations Eligible Under Section 80G

Any individual, HUF, firm, or company donating to a registered organisation with a valid 80G certification can claim this deduction.

Ensure the receipt includes the Section 80G registration number to validate your claim.

Documents Required to Claim Deduction Under Section 80G

To claim your 80G deduction, you’ll typically need:

• Donation receipt with the 80G registration number
• PAN of the donor
• Details of the recipient organisation (name, address, 80G status)
• Bank statement or payment proof
• Form 16A if TDS was deducted
• Self-declaration for cash donations
• Bank account details
• Accurate records of the donation amount, date, and payment mode

Keep these documents safely for accurate record-keeping and future income tax filings. Always follow the latest instructions issued by the Income Tax Department for proper compliance.

How to Make the Section 80G Deduction Claim

You can claim your donation under 80G while filing your income tax return. Include the relevant details in the ITR form's deduction section, the amount donated, and information about the recipient organisation.

Section 80G Tax Exemption

The tax benefits under Sec 80G of the Income Tax Act depend on:

• Nature of the donation (100% or 50%)
• Income-based qualifying limits
• Organisation’s eligibility and registration status

Donors must obtain a proper receipt and verify the organisation’s 80G approval before donating.

List of Donations Eligible for 100% Deduction Without Limit

• Prime Minister’s National Relief Fund
• National Defence Fund
• Clean Ganga Fund
• Swachh Bharat Kosh
• National Foundation for Communal Harmony
• Donations to universities or educational institutions of national eminence

How Do Deductions Under Section 80G Benefit Different Types of Taxpayers?

Whether you're an individual or a business, Section 80G deductions reduce your taxable income, lowering your overall tax liability.

Let us understand this with an example:

• D is a self-employed individual
• ABC Textiles Pvt. Ltd. is a company

Both Ms. D and ABC Textiles donate INR 80,000 each to an NGO eligible for a 50% deduction with a 10% income limit. Their total income for the financial year 2024-25 is INR 5,00,000 each. Both opt for the Old Tax Regime to claim the deduction under Section 80G.

Now, let’s understand how the donation reduces the total income for both taxpayers:

Particulars	Ms. D (Individual)	ABC Textiles Pvt. Ltd. (Company)
i) Gross total income	INR 5,00,000	INR 5,00,000
ii) Donation given to the NGO	INR 80,000	INR 80,000
iii) Eligible deduction (50% of donation)	INR 40,000	INR 40,000
iv) Max limit (10% of total income = INR 50,000)	INR 40,000 (within limit)	INR 40,000 (within limit)
v) Taxable income after deduction	INR 4,60,000	INR 4,60,000

Next, let’s understand the tax savings due to donations:

So, we see that:

• D, as an individual under slab-based taxation, saves INR 8,320 as the INR 40,000 deduction reduces her taxable income.
• ABC Textiles Pvt. Ltd., taxed at a flat 30%, saves INR 12,000 in tax due to the same INR 40,000 deduction.
• Though both donated the same amount, tax savings differ due to the difference in tax structure between individuals and companies.

This shows that the benefit from Section 80G varies based on your income type and tax rate, not just the donation amount.

Mode of Payment for Donations Under Section 80G

To claim a tax deduction under Section 80G, the mode of payment plays a critical role. Not all payment types are eligible, and adhering to the right methods ensures you receive the intended tax benefit.

Here are the key rules:

1. Cash Donations:

• Only cash donations up to INR 2,000 are eligible for deduction.
• Any amount above INR 2,000 paid in cash will not qualify under Section 80G.

2. For Donations Above INR 2,000, use one of the following:

• Cheque
• Demand Draft
• Digital payments (Net banking, UPI, credit/debit cards)

3. Donations in Kind Are Not Eligible:

• Contributions such as food, clothes, or medicines are not deductible.

Always use valid payment methods to ensure your donation is eligible under the Income Tax Act’s Section 80G.

Section 80G Validity and Renewal

Registration under the Income Tax Department is necessary for NGOs and charitable trusts to offer tax benefits to their donors.

Here are key points to keep in mind:

• Organisations get provisional registration (3 years)
• Must apply for permanent registration (valid for 5 years)
• Renewal is required every 5 years

Consideration for Section 8 Companies

Section 8 companies are not-for-profit companies registered under the Companies Act. They must renew their 80G registration to ensure donor eligibility for tax benefits from April 1, 2025.

Conclusion

Understanding Section 80G of the Income Tax Act empowers you to support meaningful causes while also reducing your tax burden. Whether you're contributing to national relief funds or local charities, being aware of the deduction limits, categories, and required documentation ensures your generosity is rewarded with tangible tax savings.

This understanding is also valuable when applying for financial products like a personal loan. Lenders assess factors such as income, repayment capacity, and overall financial credibility during the loan approval process. A well-maintained ITR with claimed deductions not only reflects responsible financial behaviour but can also enhance your disposable income, which can strengthen your loan eligibility.

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