Section 80GGA

Not all donations are eligible for tax rebates under Section 80GGA of the Income Tax Act and one should check the eligibility before donating. The following donations are eligible for tax rebate under Section 80GGA.

1. Donations to research institutions/associations/universities involved in scientific research. Any such institute/associations should adhere to rules prescribed under Section 35(1) (ii).
2. Donations to institutions/associations/colleges which are involved in research related to social science or statistics.
3. Donations to associations/institutes which are involved in rural development programs, subject to these associations meeting criteria set under Section 35CCA.
4. Donations to institutions/associations which are involved in imparting rural development training to individuals or groups.
5. Donations to associations/institutions/public sector companies or local authorities who are involved in projects or schemes which are approved under Section 35AC.
6. Donations towards the Rural Development Fund.
7. Donations towards Afforestation Fund.
8. Donations made to the National Poverty Eradication Fund.

Provisions under Section 80GGA

Deductions under Section 80GGA of the Income Tax Act are not open for all, with the profession of an individual deciding if he/she is eligible for the deduction. Individuals whose Gross Total Income does not include income which can be charged under profits and gains of a business are eligible for deductions. In essence, taxpayers who do not have an income source from business or profession are entitled for such deductions.

Section 80GGA Limit and Payment Mode

Donations made under Section 80GGA are eligible for 100% tax deduction. There is no upper limit to the amount one can donate to institutes which adhere to principles under this Section and the donations can be in the form of cash, cheque or drafts. Cash donations, however, have a maximum limit of Rs 10,000, with amounts higher than this not permitted by means of cash donations.

For example, Miss Priya has an annual taxable income of Rs 5 lakhs. She chooses to donate Rs 50,000 to an institute engaged in rural development. Under Section 80GGA her donation is now eligible for a tax deduction, making her taxable income post the donation Rs 4,50,000/- (Rs 5,00,000 – Rs 50,000). This amount will be valid only if she made payment via cheque or draft. If she paid via cash, only Rs 10,000 could be considered for deduction.

Section 80GGA and 35AC

Sections 35AC and 80GGA have certain common features when it comes to income tax deductions. While 80GGA offers 100% deduction on donations made by individuals who have an income source which does not come from a business or profession, 35AC allows individuals who have an income through business or profession to enjoy the benefits of tax deduction.

Donations under both these sections are eligible for 100% tax deduction, helping NGOs gain funds and individuals save on taxes. The major difference between these two sections lies in their carry forward policy. While deductions under Section 35AC can be carried forward to the next year in the form of a loss, deductions under Section 80GGA cannot be carried forward to the next year in the form of losses.

Things to Remember:

1. Form 58A: Donors need to ensure they get a copy of Form 58A, which is essential for them to claim 100% tax deduction in lieu of donations made to institutes/NGOs.
2. Double Deductions under Section 80GGA: Section 80GGA does not permit double deductions, i.e., if a donation towards a certain cause is claimed as a deduction for a particular assessment year, then no other deduction can be claimed for the same year under this section. Only one deduction is allowed for a particular assessment year.
3. Approval withdrawal: One should check up on an institute before donating money to see if it is registered and complies with the rules in place. It is possible for institutes to lose their affiliations/approval at times. In such cases, any donation made to an institute before it loses its approval stands valid and can be claimed for deduction.

Donations which are eligible for deduction under Section 80GGA

1. Donation made to notified Fund for Afforestation
2. Donation made to a public sector company, local authority or an approved association or institution which carries out projects or schemes approved under section 35AC.
3. Donation made to an approved association or institution which undertakes any program of rural development and is approved under section 35CCA.
4. Any donation made to a research association that undertakes scientific research, or a donation made to a college, university or any other institution to be used for scientific research that is all approved by the prescribed authority under section 35(1)(ii).
5. Donation made to notified National Poverty Eradication Fund
6. Donation made to a research association which undertakes research in social science or statistical research, or donation made to a college, university or any other institution to be used for the same purpose, and these must all be approved by the prescribed authority under section 35(1)(iii).
7. Donation made to an approved association or institution which undertakes training of person(s) for implementing programs of rural development.
8. Donation made to notified Rural Development.