All about 80G deductions in simplied manner

SECTION 80G DEDUCTION ELIGIBLE COMPUTATION

According to this section if the donation made to APPROVED FUNDS/CHARITABLE INSTITUTIONS   deduction shall be eligible.

For the purpose of this section to get deduction/exemption eligibility, donations are classified as four categories as below.

1)      100% deduction, with no ceiling limit/restriction on amount of donation

2)      50% deduction, with no ceiling limit/restriction on amount of donation

3)      100% deduction, with ceiling limit(Qualifying amount) = 10% of Adjusted Gross total income

4)      50% deduction, with ceiling limit(Qualifying amount) = 10% of Adjusted Gross total income

1)      100% deduction, with no ceiling limit/restriction on amount of donation:-

Under this category some donations are notified schemes and if assesses donated to such notified schemes then, there is no limit to donate amount, means assesses can donate any quantum of amount with no limit and shall get whole donated amount as deduction u/s 80G(Please refer Section 80G of Income tax act 1961 to know about notified schemes)

                 For understanding example, if the assesses donated Rs.10000/Rs.100000 what may be then the assesses shall get deduction of Rs.10000/Rs.100000 u/s 80G from his gross total income.

  

2)      50% deduction, with no ceiling limit/restriction on amount of donation:-

Under this category some donation are notified schemes and if assesses donated to such notified schemes then, there is no limit to donate amount and assesses shall get only 50% of their total donation amount as deduction u/s 80G, means assesses can donate any quantum of amount with no limit but shall get only 50% of donation amount as deduction u/s 80G (Please refer Section 80G of Income tax act 1961 to know about notified schemes)

                        For understanding example, if the assesses donated Rs.10000/Rs.100000 what may be then the assesses shall get deduction of Rs.5000/Rs.50000 u/s 80G from his gross total income.

3)      100% deduction, with ceiling limit/qualifying amount:-

Under this category some donations are notified schemes and if assesses donated to such notified schemes then, the assesses are restricted to donate upto sum quantum of amount(maximum ceiling limit to donate amount), even if assess donated more amount then maximum ceiling limit then only considered maximum  ceiling limit is as donated amount and assesses shall eligible to deduction u/s 80G of 100% of donation paid amount subject to maximum limit prescribed. (Please refer Section 80G of Income tax act 1961 to know about notified schemes)

                       For understanding Example 1: If the qualifying amount is Rs.5000 and assesses donated Rs.3000 then Rs.3000 shall be eligible for deduction u/s 80G from their Gross total Income.

                        Example 2: If the qualifying amount is Rs.5000 and assesses donated Rs.6000 then only Rs.5000 shall be eligible for deduction u/s 80G from their Gross total Income

   

4)      50% deduction, with ceiling limit/qualifying amount:-

Under this category some donations are notified schemes and if assesses donated to such notified schemes then, the assesses are restricted to donate upto sum quantum of amount (maximum ceiling limit to donate amount), even if assess donated more amount then maximum ceiling limit then only considered maximum ceiling limit is as donated amount and assesses shall eligible to deduction u/s 80G of 50% of donation paid amount subject to maximum limit prescribed. (Please refer Section 80G of Income tax act 1961 to know about notified schemes)

                       For understanding Example 1: If the qualifying amount is Rs.5000 and assesses donated Rs.3000 then Rs.1500 shall be eligible for deduction u/s 80G from their Gross total Income.

                        Example 2: If the qualifying amount is Rs.5000 and assesses donated Rs.6000 then only Rs.5000 shall be considered as donation amount and Rs.2500 eligible for deduction u/s 80G from their Gross total Income

For the purpose of above point no 3 and 4 Qualifying amount = Gross total income – all deductions except deduction u/s 80G(Means qualifying amount is the total income before deduction u/s 80G but after deduction of all other deductions).

IMPORTANT AND NOTABLE AND SHOULD BE REMEMBER POINTS:

                         While the assessee making donation and claiming of deduction u/s80G the following points shall be consider

1)      The donation made to the institute or trust or any other which has valid 80G registration and the time of making donation shall only eligible to claim deduction u/s 80G.(for ex: donation made to a small temple in a rural village which not recognized u/s 80G is not eligible for deduction)

2)      Donation should be made in sum of money and not in Kind[Rama Verma 187 ITR 308(SC)](for ex: cloths donated to a institute not eligible for deduction)

3)      The assessee should have proof of payment of donation and has to produce when ever it is demanded by Assessing Officer.(ex: donation receipt which contains the 80G registration details of the institute)

4)      No deduction shall be allowed in respect of donation of any sum exceeding Rs.10,000,unless such sum is paid by any mode other than cash(for ex: donation of Rs.50000 is paid in cash not eligible for deduction but if it is paid through cheque then eligible for deduction)

IMPORTANT NOTE TO THE EMPLOYER:

                             While computation of TDS deduction liability of the employee an employer shall not be consider the benefit of u/s80G deduction.

                            Means all the assesses should be get benefit of deduction u/s80G through filing of return of income u/s 139 only and can get refund of TDS amount excess deducted by the employer or any advance taxes paid excess.

Donations notified under category 1:

1)      National Defence Fund

2)      Prime Minister’s National Relief Fund

3)      Prime Minister’s Armenia Earthquake Relief Fund

4)      Africa(Public Contributions) India Fund

5)      National Childern’s Fund

6)       National Foundation for Communal Harmony

7)      Approved Universities/Educational Institutions of National Eminence

8)      Maharashtra Chief Minister’s Earthquake Relief Fund

9)      Zila Saksharta Samithi of any district

10)  National/State Blood Transfusion Council

11)  Any Fund set up by a State Gove.for providing medical relief to the poor

12)  Army Central Welfare Fund, Air Force Central Fund or Indian Naval Benevolent Fund              

13)  Andhra Pradesh Chief Minister’s Cyclone Relief Fund

14)  National Illness Assistance Fund

15)  Chief Minister’s/Lieutenant Governor’s Relief fund for any State/Union Territory

16)  National Sports Fund

17)  National Cultural Fund

18)  Fund for Technology & Application set up by Central Government

19)  National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities

20)  Gujarat Earthquake Relief Fund

Donations notified under category 2:

1)      Jawaharlal Nehru Memorial Fund

2)      Prime Minister’s Drought Relief Fund

3)      Indira Gandhi Memorial Trust

4)      Rajiv Gandhi Foundation

Donations notified under category 3:

1)      Donation for promoting family planning, paid to –a) government, or b) Any approved Local Authority/Association/Institution

2)      Amount paid by a company to the Indian Olympic Association of Notified Institution, for the development of infrastructure or sponsorship for sports and games in India.

Donations notified under Category 4:

1)      Approved Institutions or Fund satisfying prescribed conditions. ( if any Institution incurs expenditure of Religious Nature not exceeding 5% of its Total Income, it is still considered to be for charitable purpose only)

2)      Donations for charitable purposes other than promoting family planning, paid to Government or any Local Authority

3)      An Authority constituted in India or under any other law enacted – a) for dealing with and satisfying the need for housing accommodation, or b) planning, development or improvement of cities, towns and villages, or c) for both

4)      Any Authority or Corporation for the benefit of Minority Community[as per Sec.10(26BB)]

5)      Any notified Temple, Gurdwara, Mosque, Church or other notified place, for renovation/ repair etc… means any other institute/trust or any other which is not cover under any of the above 3 categories and got registration u/s 80G of the Income tax act,1961.

Thank you for spending your valuable time, the reason behind the posting of this article is to update and clarify the doubts of the new students/learners.

 Author : Dintakurthi Tirumala                       

Gist of latest important tax caselaws

SECTION 10(22)  
EDUCATIONAL INSTITUTIONS

Where assessee trust, running a school, collected excess fee in name of development fund which was not brought in its books of account, in view of fact that trust was established for benefit of children of managing trustee and, moreover, there was no obligation on its part to reinvest amount in question in educational activities, it was to be concluded that trust existed for profit motive and, therefore, assessee's claim for exemption of income under section 10(22) and 10(23C) was to be rejected - Assistant Commissioner of Income-tax, Central Circle, Kollan v. Sabarigiri Trust (2014) 43 taxmann.com 19 (Cochin - Trib.)

Below are the recent important tax caselaws related to Income tax, Service tax, Excise in brief. The citation is made available for your benefit :

INCOME TAX

SECTION 12AA

CHARITABLE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE

Cancellation of registration : In terms of Circular No. 1/2011 dated 6-4-2011, registration already granted under section 12A can be cancelled only for assessment year 2011-2012 and subsequent assessment years; in instant case, assessment year involved being 2009-10, Assessing Officer could not cancel registration already granted to assessee-trust by taking a view that activities of trust were hit by proviso to section 2(15) - Prithviraj Kapoor Memorial Trust & Research Foundation v. Director of Income-tax (Exemption) (2014) 43 taxmann.com 20 (Mumbai - Trib.)     SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF Interest : Where assessee used borrowed funds for purpose of setting new project for expansion of its business, interest was to be allowed as revenue expenditure - Commissioner of Income-tax, Meerut v. Diwan Rubber Industries (2014) 43 taxmann.com 27 (Allahabad) SECTION 43B BUSINESS DISALLOWANCE - CERTAIN DEDUCTIONS TO BE ALLOWED ONLY ON ACTUAL PAYMENT Provident Fund contributions : Where employer did not deposit PF/ESI contribution within due date as contemplated under PF/ESI Scheme/Act, but deposited it before due date of filing return, assessee would be entitled to deduction - Essae Teraoka (P.) Ltd. v. Deputy Commissioner of Income-tax (2014) 43 taxmann.com 33 (Karnataka)       SERVICE TAX SECTION 65(69) TAXABLE SERVICES - MARKET RESEARCH AGENCY'S SERVICES Research on equity is a product research and is liable to service tax under Market Research Services - Kotak Securities Ltd. v. Commissioner of Service Tax (2014) 43 taxmann.com 164 (Mumbai - CESTAT) SECTION 65(90a) TAXABLE SERVICES - RENTING OF IMMOVABLE PROPERTY SERVICES Where assessee has been paying service tax on an activity for a subsequent period, it cannot contend, for earlier period, that very same activity was not a service but only a sale of goods - Shoppers Stop Ltd. v. Commissioner of Service Tax (2014) 43 taxmann.com 173 (Mumbai - CESTAT)

Recent important tax caselaws

Below are the recent important tax caselaws related to Income tax, Service tax, Excise in brief. The citation is made available for your benefit :

INCOME TAX

SECTION 2(47)

CAPITAL GAINS - TRANSFER

Immovable property : Where in terms of joint development agreement of land, assessee executed a power of attorney in favour of representative of builder agreeing to authorize him to execute sale of built-up area, even though builder could not subsequently complete said agreement, in view of fact that substantial construction had already been completed, transfer took place within meaning of section 2(47) and, thus, assessee was liable to pay capital gain tax on such transfer - Smt. Prameela Krishna v. Income-tax Officer, Ward -1(2), Mysore (2014) 42 taxmann.com 185 (Karnataka)     SECTION 12AA CHARITABLE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE Scope of power : Question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant only when income of trust is being assessed in terms of section 11, however, at time of disposing of application of a trust seeking registration, Commissioner has to merely decide whether said trust has fulfilled necessary requirements of registration as provided under section 12A - Commissioner of Income-tax, Rajkot –II v. Leuva Patel Seva Samaj Trust (2014) 42 taxmann.com 181 (Gujarat)       SERVICE TAX SECTION 65(27) COMMERCIAL TRAINING OR COACHING SERVICES - STAY ORDER Sale of CD ROMs containing "live virtual class" provided to enhance skill or impart knowledge on certain subjects to buyers of CDs and imparting "online learning/e-learning" to certain customers not covered under Commercial Training or Coaching Services - Sun Microsystems (I) (P.) Ltd. v. Commissioner (LTU), Bangalore (2014) 42 taxmann.com 321 (Bangalore - CESTAT)       SECTION 93 EXEMPTIONS - SERVICE TAX If a co-owned property is rented out by its co-owners to a single person, every co-owner can avail small service provider's exemption separately - Manju Champaklal Bafna v. Commissioner of Service Tax, Ahmedabad (2014) 42 taxmann.com 320 (Ahmedabad - CESTAT)