This write-up contains comprehensive content on the topic of charitable trust / institutions. The content is in the form of questions and answers so that the reader can be benefitted from the precision reading. The content is dynamic and will be updated from time to time. Though all the precautions have been taken while preparing this write-up, in case you come across any discrepancy you may notify us at fisclanow@gmail.com or to our co-author CA Hemant Sharma at hemant.sharma53@gmail.com
Whether a donor can be denied deduction under section 80G on trust failing the conditions prescribed under Income Tax Act 1961?
Explanation to Section 80G declares that the deduction to assessee u/s 80G(5) cannot be denied merely on either or both of the following grounds:
(i) that after making a donation, any part of the income of the institution or fund has become chargeable to tax due to non-compliance with any of the provisions of section 11 or section 12, or section 12A
(ii) that, under section 13(1)(c), the exemption u/s section 11 & section 12 is denied to the institution or fund in relation to any income arising to it from any investment referred to in section 13(2)(h) where the aggregate of the funds invested by it in a concern referred to in the said clause (h) does not exceed 5% of the capital of that concern
Is there any specific format for Donation Slip under section 80G?
There is no specific format prescribed under the Income Tax Act 1961, however, certain things are to be mentioned in the donation slip which includes the
A. Donor’s Particulars – Name, PAN, Mail Id, Phone No.
B. Donation Particulars – Amount in Word, Amount in Numbers, Mode of Donation & Specific Instruction, if any.
C. Trust / Entity Particulars – Trust Name, Mail Id, Phone No., Address, Website (If Any)
D. Trust / Entity Registration Details & Validity – Registration No. under section 80G & 12AA along with the validity
E. Trust Stamp and Sign of the Authorised Signatory
F. Date of Donation & Unique Donation Slip No.
G. One may also choose to include banking details of Trust / entity for encouraging the donations.
What is the Maximum Cash Donation that can be given to the Trust / Entity registered under section 80G?
Though one can make a donation of any amount in Cash, however, no deduction shall be allowed to the donor under section 80G in respect of donation of any sum exceeding Rs. 2,000/- (Two Thousand) unless such sum is paid by any mode other than cash.
Most of my income is given away in charity and I am left with just enough money to meet my personal requirements. What will be considered as my income and how much deduction under section 80G will be provided to me?
What is done after the income is earned by you will not give you tax exemption. In other words, it does not matter if you donate all the income for charity to the trust / entity / institution registered under section 80G, the deduction for donation will only be provided in accordance with the limits given under section 80G. If your donation exceeds the amount prescribed as upper-limit in section 80G, then, the amount of donation exceeding the limit will be taxed normally.
What are the limits for deductions under section 80G?
The deductions allowed to a person is restricted till ten percent (10%) of the Adjusted Gross Total Income
How to Calculate Adjusted Gross Total Income for the purpose of calculating the deduction limit under section 80G?
Step 1 Calculation of Adjusted Gross Total Income
Gross Total Income (GTI)
Less – Deductions under Chapter VI-A, except under section 80G
Less – Short-term capital gain taxable under section 111A
Less – Long-term capital gains taxable under sections 112 & 112A
Less – Any income on which income-tax is not payable
Less – Income referred to in section 115A(1)(a), 115AB, 115AC, 115AD and 115D
The result of the above calculation will be Adjusted Gross Total Income
Step 2 Calculate 10% of adjusted total income
Step 3 Calculate the actual donation made by you which is subject to the qualifying limit i.e., either 100% of the donation amount or 50% of the donation amount
Step 4 Lower of Step 2 & step 3 will be the maximum permissible deduction
Step 5 The amount computed in step 4 will be against donations qualifying for 100% deduction. Thereafter, 50% of the balance qualifies for deduction under section 80G.
For Instance, As per steps 1 & step 2, if the Adjusted GTI is Rs. 10 Lacs, then the 10% of Adjusted GTI will be Rs 1 Lac.
Now, the actual donation made by a person to Institutions under section 80G is Rs 1.50 Lacs (Rs. 30 Thousand towards institutions that allow deduction without subject to qualifying limit, the next Rs. 75 Thousand towards the institution for which deduction is allowed 100% subject to qualifying limit, & the balance Rs. 45 Thousand towards the institution for which deduction is allowed 50% subject to qualifying limit). Therefore, as per Step 3, the total donation subject to qualifying limits is Rs. 1.20 Lacs.
The lower of the above two will be Rs. 1 Lac. Now, Rs. 75 Thousand qualifying 100% will be first adjusted in Rs. 1 Lac, and Rs. 25 Thousand qualifying for 50% deduction will then be adjusted towards the balance of Rs. 1 Lac. Consequently, 100% of Rs. 75 Thousand & 50% of Rs. 25 Thousand will be allowed as deduction under section 80G.
Therefore, the total deduction under section 80G will be Rs. 117.5 Thousand
(Rs. 30 Thousand + Rs 75 Thousands + Rs. 12.5 Thousand)