Save income tax with help of donations under section 80GGA
January, 12th 2015
There is a tax deduction available for donations made by an individual for charitable purposes. This is very well known and quite a few people would have taken the benefit of this route for the purpose of the contributions that they have made.
However this is not the end of the matter because if there is a donation made for scientific research or for rural development then the individual can also take benefit of this step. This is the reason that every person should look carefully at the details and try and make the most out of the opportunity that they have available to them. Here are a few points that are significant in the whole situation.
Additional deduction The normal or the usual deduction that is claimed for amounts given for charitable purposes comes under Section 80G of the Income Tax Act. In addition to this there is also another Section 80GGA where donations made for scientific research or rural development also gets a deduction. The important thing here is that the areas for claiming the benefit are very specific and is not actually as broad based as that witnessed in case of charitable contributions. The presence of this route also actually means that the individual can look at the alternatives that are available in terms of where they can donate the amount so that it is used for the appropriate purpose.
Claiming the benefit One thing that an individual has to understand is that they can claim the benefit under this head if they do not have income from business or profession. If they have income from this area then the benefit for the business is available under another section where the amount would be deductible from the income that is taxable as that from business or profession. However for someone who does not have income from this head they would not have access to the deduction and hence this special section has been created.
How to get the benefit In order that the individual gets the benefit of the deduction the donation or the contribution has to be given to an approved research association or university, college or other institution to be used for scientific research and rural development. A contribution can also be made for the purpose of an eligible project or scheme under Section 35AC or for the purpose of the notified National Fund for Rural Development or notified National Urban Poverty Eradication Fund. This clearly is a long list of the areas where the benefit would be available and hence this should be considered.
Amount The amount that is available as the deduction is also significant because this will determine the actual amount that would be deductible. In actual terms 100 per cent of the amount that is donated or contributed would be eligible. For example if a person has made a contribution of Rs 50,000 then the amount would be eligible for the deduction. This is separate from the position that is witnessed under a charitable donation because there normally 50 per cent of the amount donated is available as a deduction and at the same time there is a limit in terms of the 10 per cent of the gross total income. There is no such limit here which is present and hence this is an advantage for the individual because they can ensure that a higher amount is actually available for the benefit. This also means that there would have to be some amount of planning that is undertaken and which would help them in making the decision about the amount to be contributed.