When an individual makes a donation to a charitable institution registered under sections 12AA and 80G of the Income Tax Act, they should ensure they collect and maintain certain documents to claim the deduction under section 80G. Here’s an explanation with an example:
Key Documents Required:
Receipt from the Charity:
The receipt should include the name and address of the trust, the name of the donor, the amount donated (in figures and words), and the registration number of the trust under section 80G.
Copy of the 80G Certificate:
This certificate is issued to the charitable institution by the Income Tax Department, confirming its eligibility to receive donations that qualify for a deduction.
Proof of Payment:
This could be a bank statement, cheque, or any other form of transaction proof to show the payment was made.
Example:
Let’s assume Mr. Sharma donates ₹10,000 to a charitable institution named “Helping Hands Foundation,” which is registered under sections 12AA and 80G.
Steps Mr. Sharma should follow:
Obtain a Receipt:
- After making the donation, Mr. Sharma should request a receipt from Helping Hands Foundation. The receipt should clearly mention the following:
- Name and address of Helping Hands Foundation
- Registration number under section 80G
- Name of Mr. Sharma
- Amount donated (₹10,000 in figures and words)
- Date of the donation
Copy of the 80G Certificate:
- Mr. Sharma should also request a copy of the 80G certificate from Helping Hands Foundation. This certificate confirms that the institution is eligible for receiving donations that qualify for tax deductions.
Proof of Payment:
- Mr. Sharma should keep a copy of his bank statement or the cheque used for the donation. This serves as proof that the donation was indeed made.
Claiming the Deduction:
When filing his income tax return, Mr. Sharma can claim the deduction under section 80G. The amount of deduction can be either 50% or 100% of the donation amount, depending on the type of charitable institution, subject to the maximum limit of 10% of the adjusted gross total income.
For instance, if Helping Hands Foundation qualifies for a 50% deduction, Mr. Sharma can claim ₹5,000 (50% of ₹10,000) as a deduction under section 80G.
Summary:
By keeping these documents (receipt, 80G certificate, and proof of payment), Mr. Sharma ensures that he has all the necessary evidence to claim the deduction under section 80G during tax filing. This not only helps in reducing his taxable income but also provides transparency and compliance with the Income Tax Act.
By following this process, individuals can effectively support charitable causes while also benefiting from tax deductions.
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