How to Claim Tax Deduction for Donations Under Section 80G of the Income Tax Act in India

Donating to charitable causes not only supports social welfare but can also provide significant tax benefits under Indian income tax law. Section 80G of the Income Tax Act, 1961 allows taxpayers to claim deductions for donations made to specified funds, institutions, and charitable organizations. The deduction ranges from 50 percent to 100 percent of the donated amount, depending on the type of recipient, and may be subject to a qualifying limit based on the taxpayer's adjusted gross total income. This article provides a comprehensive guide on how to claim this deduction, the categories of eligible donations, documentation requirements, and the key changes introduced by the Income Tax Act, 2025.

Legal Framework

Section 80G of the Income Tax Act, 1961 provides the legal basis for claiming deductions on charitable donations. From Assessment Year 2026-27 onwards, the Income Tax Act, 2025 has come into effect, and Section 133 replaces Section 80G as the donor-side provision. The substantive rules remain largely the same, but charitable institutions must now register as Registered Non-Profit Organisations (RNPOs) under Section 332 and obtain approval under Section 354 to issue tax-deductible donation receipts. The deduction under Section 80G (or Section 133) is available only under the old tax regime. Taxpayers who have opted for the new (default) tax regime under Section 115BAC cannot claim this deduction. Taxpayers should also be familiar with related procedures, such as applying for a TAN.

Categories of Eligible Donations

Donations under Section 80G are classified into four categories. Category 1 provides 100 percent deduction without any qualifying limit, covering donations to the National Defence Fund, the Prime Minister's National Relief Fund, the PM CARES Fund, the National Foundation for Communal Harmony, and the National Children's Fund. Category 2 provides 50 percent deduction without any qualifying limit, covering donations to the Jawaharlal Nehru Memorial Fund and the Prime Minister's Drought Relief Fund. Category 3 provides 100 percent deduction with a qualifying limit, covering donations to local authorities for family planning and notified sports associations. Category 4 provides 50 percent deduction with a qualifying limit. This is the most common category, covering donations to most approved charitable trusts registered under Section 12A, subject to a limit of 10 percent of adjusted gross total income. Organizations involved in charitable activities may also refer to the guide on registering a charitable or religious trust.

Mode of Payment and Restrictions

Cash donations exceeding Rs 2,000 are not eligible for deduction under Section 80G. To claim the full benefit, donations above Rs 2,000 must be made through cheque, demand draft, UPI, or electronic bank transfer. This restriction was introduced to promote transparency and create an audit trail for charitable contributions. Donations in kind, such as food, clothing, or materials, do not qualify for deduction under Section 80G. Only monetary contributions are eligible.

Step-by-Step Process for Claiming the Deduction

Step 1: Verify the Eligibility of the Recipient. Before making a donation, confirm that the institution or fund is approved under Section 80G by checking its registration number and validity period on the Income Tax Department's website.

Step 2: Make the Donation. Ensure the donation is made through an eligible mode of payment. Retain proof of payment, such as the bank statement, UPI transaction receipt, or cheque copy.

Step 3: Obtain the Donation Receipt. Collect the official donation receipt from the institution, which should include the institution's name, PAN, registration number under Section 80G, the donation amount, the date of donation, and the receipt number.

Step 4: Obtain Form 10BE. The donee institution is required to file Form 10BD (Statement of Donations) with the Income Tax Department, based on which Form 10BE (Certificate of Donation) is generated. The taxpayer should ensure that the institution has issued Form 10BE confirming the donation details.

Step 5: Enter Details in the ITR. While filing the Income Tax Return under the old tax regime, navigate to the Schedule 80G section. Enter the donation amount, the name of the fund or institution, the PAN of the institution, and the details from Form 10BE.

Step 6: Submit the ITR. Complete the filing of the return and verify it through Aadhaar OTP, DSC, or EVC. The deduction will be applied against the gross total income to arrive at the taxable income.

Required Documents

The following documents are required to claim the deduction: (1) Official donation receipt from the institution; (2) Form 10BE (Certificate of Donation) issued by the institution; (3) Proof of payment such as bank statement, UPI receipt, or cancelled cheque; (4) PAN of the donee institution; (5) Section 80G registration number and validity details of the institution; and (6) Copy of the Income Tax Return for the relevant assessment year. Taxpayers who discover errors in their filed returns may file a revised return under Section 139(5).

Qualifying Limit Calculation

For donations subject to the qualifying limit, the total eligible donation cannot exceed 10 percent of the taxpayer's adjusted gross total income (AGTI). The AGTI is calculated by reducing the gross total income by all deductions under Sections 80CCC to 80U (except Section 80G itself), long-term capital gains, and income under Sections 115A and 115D. For example, if a taxpayer's AGTI is Rs 10,00,000, the maximum eligible donation would be Rs 1,00,000. If the taxpayer donated Rs 1,50,000 to an institution eligible for 50 percent deduction with qualifying limit, only Rs 1,00,000 would be considered, yielding a deduction of Rs 50,000. Taxpayers managing TDS on fixed deposits should also review the process for filing Form 15G and Form 15H.

What Happens After Claiming the Deduction

After the ITR is filed and verified, the Income Tax Department may process the return and issue a refund if the deduction reduces the tax liability below the taxes already paid. The department may also select the return for scrutiny, in which case the taxpayer will need to produce all supporting documents, including Form 10BE, donation receipts, and proof of payment. It is essential that the details entered in the ITR match the information reported by the donee institution in Form 10BD. Any discrepancy may lead to denial of the deduction and issuance of a demand notice. Taxpayers who have made payments related to stamp duty transactions may also want to understand the process for claiming stamp duty refunds.

Key Takeaways

1. Section 80G of the Income Tax Act, 1961 (replaced by Section 133 of the Income Tax Act, 2025 from Assessment Year 2026-27) allows deductions of 50 percent or 100 percent on donations to approved funds and institutions.

2. Cash donations exceeding Rs 2,000 are not eligible for deduction; donations above this threshold must be made through cheque, draft, UPI, or electronic bank transfer.

3. Donations subject to the qualifying limit are capped at 10 percent of the taxpayer's adjusted gross total income.

4. Form 10BE, issued by the donee institution after filing Form 10BD with the Income Tax Department, is essential for claiming the deduction.

5. The deduction is available only under the old tax regime; taxpayers who have opted for the new tax regime under Section 115BAC cannot claim this benefit.

6. Understanding related procedures, such as obtaining e-stamp certificates, can help taxpayers manage their overall compliance obligations effectively.