Are you giving back to society under section 80G of Income Tax Act?

You may be an Individual, Company, Firm or any other kind of taxpayer, but you are also a part of a larger and more complex system known as ‘Society’. For the development of the nation, it is obligatory to pay taxes abiding by various Acts. However, our laws have enabled us give some fraction of our income tax to the notified relief funds and charitable institutions under section 80G of Income Tax. Let us see how well do we know Section 80G?

Hiren’s Dilemma in the month of March to save Tax!

Hiren Vyas plans his investments every year. In addition to EPF, PPF, Tuition Fees of Children, Life Insurance Premiums, Post Office Savings, NSC, ULIPs, Mutual Funds/ Pension Fund, Principal Repayment of Housing Loan, Tax Saving Bonds/ FDs and Annuity Plans covered under section 80C & 80CCC, he has also bought a house property to avail the deductions under ‘interest on housing property.’

A cap of 1.5 Lakh suffices his regular savings under this section of Income Tax.

Moreover, under section 80 D he has secured health of his family and parents within the limit of the act. As he does not have any Education loan, he is unable to reap the benefit of 80E.

Now, whenever he thinks of more deductions from the Income Tax, he finds an option of 80G and 80GGA, which he does not understand at all! He almost forgoes 100% to 50% of the tax deduction under 80G or 80GGA, because not only he lacks the zeal of giving back to society but also has no knowledge on how to get this done.

Hiren’s first encounter with 80G:

Hiren Vyas often travels to Udaipur for family vacation. During one such trip, he came across Narayan Seva Sansthan in Badi Village in Udaipur. He witnessed a mass wedding of specially abled couples in the city. Next day it was all over the newspapers and this intrigued him enough to inquire further about the Narayan Seva Sansthan. He found their landline number on website https://www.narayanseva.org/ and contacted them.

To his surprise, he was invited with his family to visit Narayan Seva Sansthan’s ‘Smart Campus for Specially Abled’ at Badi Village near Udaipur. A car came to pick-up him and pilot greeted with ‘Namaskar’. He went there and was astound to see a different world where there is no ‘Cash Counter’. As a daily practice, a free AC vehicle reaches to pick-up the patients and their families at the Udaipur railway station based on prior appointment; provides them with free accommodation and food at guesthouse. Narayan Seva Sansthan is the place where patients suffering from polio, Cerebral Palsy, Lymphatic Filariasis belonging to India, Afghanistan, Pakistan, Nepal, Bangladesh, Ukraine, UK and USA and various other countries are treated under one roof at no cost. Narayan Seva Sansthan has operated on over 3.5 lakh patients in last 30 years and has provided them with full socio-economic support by availing them with best of the medical services, medicines and technology for free. This is a place where no cash counter for anything! Narayan Seva Sansthan possesses 1100-bedded hospitals run by a team of 125 doctors and nursing staff and operates on about 95 patients daily, serving humanity. 

He was humbled by the knowledge of this noble cause and decided to check whether this charitable trust is registered and comes under 80G. He found it comes under 80G – Within Limit – D. He paid donation of Rs. 30,000 and filed return in last FY and benefited with 50% tax deduction.

Check below Hiren’s Taxable Income Without 80.

Particulars Salary	Without 80G 2,00,000
Income from House Property	1,00,000
Business and Profession	0
Capital Gain – Short Term	50,000
Capital Gain – Long Term	1,50,000
Other Source Income	50,000
Gross Total Income	5,50,000
Deductions U/S 80c to 80u
80c	(80,000)
80d	(20,000)
80g	0
Net Taxable Income	4,50,000

As witnessed in Hiren’s case, most of the salaried class individuals have the similar dilemma on achieving optimum deductions from the Gross Total Income. Let’s explore Section 80G under Income Tax Act and understand the types of institutions and charitable trusts or government funds accepting the donations under this section.

Kind of Institutions and Charitable Trusts Accepting Donations under 80G: (Annexure II)

Section 80G is divided into two main parts – (i) Without Limit (ii) Within Limit

Both without and within limit have further sub sections and conditions as below -

This deduction is allowed to all kind of assessee – individual, partnership firm, company etc

Donation should be made in terms of money and not in kind

Donations should be made to specified fund institutions

If paid in hard cash, should not be allowed deduction over Rs 2000/- (So better to pay by cheque)

Donations made under Without Limit (i)(a) is 100% deductible

Donations made under Without Limit (i)(b) is 50% deductible

Donations made under Within Limit (ii)(a) is 100% deductible where Qualifying Limit is 10% of Adjusted Gross Total Income (GTI);

Donations made under Within Limit (ii)(b) is 50% deductible where Qualifying Limit is 10% of Adjusted GTI

Adjusted GTI = GTI – Long Term Capital Gain – Short Term Capital Gain (Under Section 111A) – All Deductions (except 80G)

Assessee can also utilize all four options together and obtain the deductions under 80G

Let’s see the new break-up of 80G application is how much beneficial to Hiren -

Particulars (With 80G)	Without Limit		Within Limit		All Together (in case used all four options)
	100% Deduction	50% Deduction	100% Deduction	50% Deduction	-
Salary	2,00,000	2,00,000	2,00,000	2,00,000	2,00,000
Income from House Property	1,00,000	1,00,000	1,00,000	1,00,000	1,00,000
Business and Profession	0	0	0	0	0
Capital Gain – Short Term	50,000	50,000	50,000	50,000	50,000
Capital Gain – Long Term	1,50,000	1,50,000	1,50,000	1,50,000	1,50,000
Other Source Income	50,000	50,000	50,000	50,000	50,000
Gross Total Income	5,00,000	5,00,000	5,00,000	5,00,000	5,00,000
Less Deductions
80C	(80,000)	(80,000)	(80,000)	(80,000)	(80,000)
80D	(20,000)	(20,000)	(20,000)	(20,000)	(20,000)
Donation Made	50,000/-	30,000/-	20,000/-	30,000/-	1,30,000/-
80G Applied	(50,000)	(15,000)	(20,000)	(15,000)	(1,00,000)
Net Taxable Income	3,50,000	3,85,000	3,80,000	3,85,000	3,00,000