Section 80G of Income Tax

80G. Deduction is in respect of donations to certain funds and charitable institutions

The question that we would have is , is the entire donation under section 80G deductible and the answers to this is -----NO

For the sake of Section 80G , instituions are classified under four different exempt categories

Category 1
Donations to whom qualify for 100% deduction.

Category 2
Donations to whom qualify for 50% deduction.

Category 3
Donations to whom qualify for 100% deduction , but to be restricted to 10% of Total Income

Category 4
Donations to whom qualify for 50% deduction.but to be restricted to 10% of Total Income

Let me explain

Example 1: Assuming that an individual has a Total Income of Rs.6,00,000
so after the standard 80C deduction of about 1 Lakh , the total income reduces to Rs.5,00,000.

Now if this Individual has donated Rs.70,000 to a Category 1 institution , then total taxable income of this individual would be
Rs.5,00,000 - Rs.70,000 = Rs.4,30,000 . Entire seventy thousand would be considered.

Example 2: Assuming that an individual has a Total Income of Rs.6,00,000
so, after the standard 80C deduction of about 1 Lakh , the total income reduces to Rs.5,00,000.

Now, if this Individual has donated Rs.70,000 to a Category 3 Institution , then total tax able income of this individual would be
Rs.5,00,000 - Rs.50,000 = Rs.4,50,000 . Fifty thousand is subtracted and not seventy thousand as 10% of the total Income of Rs, 5 Lakhs would be fifty thousand , which cannot be crossed , even though a higher amount has been donated .

So in case you are donating to a instituation to avail tax exemption , be very clear of what to expect from taxation stand point .

All that i would like to add is that, if you are donating, do so as an act of faith and as an act of giving back to the society from which you have gained so much , rather than as an act of saving tax

Section 80G

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