Tax talk: Donations for scientific research are eligible for tax deduction

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The government provides tax benefits under Section 80G of the Income-Tax Act, 1961, to salaried employees for donations. The government provides tax benefits under Section 80G of the Income-Tax Act, 1961, to salaried employees for donations.
SummaryThe government provides tax benefits under Section 80G of the Income Tax Act, 1961, to salaried employees for donations.

The government provides tax benefits under Section 80G of the Income-Tax Act, 1961, to salaried employees for donations. There are certain to the deduction, though. Donations made to foreign trusts by an individual or companies do not qualify for deduction. Similarly, donations made to political parties, including paying for brochures, souvenirs or pamphlets, are not eligible. To avail deduction under 80G, all donations above Rs 10,000 have to be made by cheque or bank draft.

Salaried employees can get deduction for certain donations for scientific research, or even rural development, under Section 80GCA of the Income-Tax Act. Under the new circular issued by Central Board of Direct Taxes, an employee can claim deduction of any sum for donations made to a research association, university, college or other institutions used for scientific research.

One can also get deduction of the full amount of donations made to an association or institution that undertakes a programme for rural development.

The taxpayer has to attach a certificate under Section 35CCA of the I-T Act from the association or institute to claim the deduction.

Similarly, salaried employees can make donations to a public sector company or a local authority or to an association or institution that is approved by the National Committee for Promotion of Social and Economic Welfare, certified under Section 35AC(2) of the I-T Act. The taxpayer must ensure that he collects the certificates for donations — the CBDT circular has underlined that “the drawing and disbursing authorities will check all conditions after production of evidence of actual payment of donations and a receipt from the person to whom the donation has been made”.

Under Section 80GGA, no deduction will be allowed if the employee has a gross total income that is chargeable under the head of profits and gains of business and profession. The drawing and disbursing authorities will have to ensure a self-declaration from the employee to this effect.

Even for other donation under Section 80G, a receipt issued by the trust receiving the donation is a must. The employee must ensure that the receipt has details of name, address and Permanent Account Number (PAN) of the trust, the name of the donor and the amount contributed. The registration number of the trust, issued by the Income-Tax Department under Section 80G, is a must for claiming tax benefit.

The government periodically releases a list of approved charitable institutions and funds that are eligible to receive donations that qualify for deduction. The list includes trusts, societies and corporate bodies incorporated under Section 25 of the Companies Act, 1956, as non-profit companies. The Income-Tax Department issues the registration number for a limited period of two years, which can be renewed. The registration number has to be printed on the receipt and also the validity period must be mentioned on it.

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