The Income Tax Act,1961 contains a huge list of sections and clauses that determine the tax exemption applicable for various financial transactions. While income tax is levied on incomes of self-employed as well as salaried individuals, tax exemption is a tax relief given to taxpayers on account of certain transactions that they make. Section 80G deals with exemptions related to money donated towards charity. Let us look into a detailed view of this section and also the sub-sections that fall under it.History of Section 80G:
Section 80G came to be included under the Income Tax Act from the year 1967. Since the inception of the Income Tax Act in 1961, several tax deductions have been done away with, however, section 80G has survived till date and is an important section that adds to the social welfare and responsibility of the nation.
What kind of Transactions are Exempted under Section 80G of the Income Tax Act?
Section 80G offers tax exemption on amounts that are donated towards charitable organisations registered with the government of India. However, the number of charitable trusts running in the country is huge and as such distinguishing between genuine organisations and those that are fake becomes an exceedingly difficult task. For this purpose, government of India has made it mandatory for charitable organisations to register with the Income Tax Department. Tax rebate under section 80G is rolled out to taxpayers only when donations towards these registered charitable organisations are made.
Following are some of the most significant donations that are exempted from tax under section 80G:
- Donations to private trusts
- Donations towards trusts and funds set up by the government of India
- Any fund set up by the government for relief in case of various natural calamities like the Gujarat earthquake or the Tsunami floods
- Donations to approved organisations that indulge in research functions
What Financial Transactions are Exempt from Tax, under Section 80GGA of the Income Tax Act?
Under section 80G comes another sub-section, 80GGA which exempts the money donated towards any of the following causes:
- Any sum paid to a college, university or organisation that is registered with the Income Tax Department and is involved in scientific research
- Any sum paid towards a registered organisation that works for rural development
- Any sum paid to any organisation which is registered with the National Committee, for carrying out eligible projects and schemes of the government
- Any sum paid by the taxpayer towards rural development fund set up by the central government
- Any amount paid by the assessee towards National Urban Poverty Eradication Fund set up by the government
Proofs Required to Claim Tax Exemption under Section 80G and 80GGA:
Following are the documents that serve as proof towards donations made under section 80G and section 80GGA of the Income Tax Act.
- Stamped receipts listing down the amount of donation and the registered name of the trust as well as that of the income tax assessee. On this receipt also, the most important figure is the registration number furnished by the Income Tax Department. This number is mandatory for processing of tax exemption.
- Donations made in cheque or cash are only eligible for tax exemption. However, various banks have started rolling out functionality that links online donations too with tax receipts. Donations made in kind are not subject to any tax rebate.
- No deduction under Section 80G is allowed in case the amount donated is more than Rs.10,000 and is done in cash. However, donations of more than Rs.10,000 are eligible for tax exemption if the amount is furnished via bank accounts through cheques or drafts or online transfers.