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Section 80G of the Income Tax Act allows tax deduction on donations made to eligible charitable organizations. Donations made in kind and in cash above ₹2,000 don’t qualify for tax breaks.
“All NGOs or charitable institutions do not automatically qualify to provide their donors with a deduction u/s 80G either. Only those organizations approved by the Commissioner of Income Tax (Exemptions) for receipt of donations and issuance of 80G certificates can do so," said Suresh Surana, founder, RSM India.
The list of eligible organizations is available on the income tax website. For taxpayers who donate through crowdfunding sites such as Ketto and Milaap, the eligibility of the organizations is mentioned on the campaign page. “Individuals who raise funds for personal causes or for family or friends don’t qualify for 80G deduction. This is peer-to-peer crowdfunding where the recipient is an individual and donors in this case don’t get tax breaks," said Varun Sheth, co-founder and CEO, Ketto.
However, these platforms don’t assume the responsibility of issuing 80G certificates or Form 10BE (starting in the current assessment year).
Beginning financial year 2021, charitable organizations have to declare details of all donations received in a year to the tax department through Form 10BD. It’s only after they declare the statement of donation and issue Form 10BE to donors that the latter can avail tax deduction on donations. The due date to file Form 10BD is 31 May of the following financial year. For instance, due date for the last financial year 2020-21 was 31 May 2022.
“Form 10BE is necessary for the donors now to avail section 80G deduction. Hence, if the donee fails to generate this in time or has incorrect or no information about its donors, the donor will not be able to avail the tax benefit," Maneet Pal Singh, partner, I.P. Pasricha & Co.
The eligible deduction under 80G will be prefilled in your Income Tax Return (ITR), as per Archit Gupta, founder, Clear. If the information is not there in the ITR form, you should contact the organization to check whether it has filed Form 10BD within the due date.
Some organizations allow 50% or total deduction, as applicable, without a qualifying limit, while others come with a qualifying limit of 10% of the adjusted gross total income. This means all donations made to institutes falling in the latter category should not exceed 10% of the adjusted gross total income.