Section 80G
The Income Tax Act provision letting any taxpayer deduct donations to specified funds and registered charitable institutions — at 100% or 50%, some capped at 10% of adjusted gross total income.
In plain language
Section 80G of the Income Tax Act, 1961 is why a donation can reduce the donor's tax bill.
When a taxpayer gives money to a specified relief fund or a registered charitable institution, the amount given, or a share of it, can be claimed as a deduction when filing the income tax return. That lowers taxable income.
For a Not for Profit Organisation the section matters twice over. An NPO can extend this deduction to its donors only once it is approved under Section 80G. Without that approval a donation to it still helps the cause, but gives the donor no tax deduction under this section. The Social Stock Exchange therefore asks NPOs for a valid 80G registration when they register.
The section is open to almost every kind of taxpayer. Individuals, partnership firms, HUFs, companies and others can claim it, irrespective of the type of income they earn.
How it works
The four categories (Chapter 10, 10.2):
| Deduction | Qualifying limit | Workbook examples |
|---|---|---|
| 100% | None | National Defence Fund, PM's National Relief Fund, PM CARES Fund, National Foundation for Communal Harmony, National/State Blood Transfusion Council |
| 50% | None | PM's Drought Relief Fund, Indira Gandhi Memorial Fund |
| 100% | Up to 10% of adjusted gross total income | Local authorities or government, to promote family planning; Indian Olympic Association |
| 50% | Up to 10% of adjusted gross total income | Local authorities or government, for any charitable purpose other than family planning |
Adjusted gross total income is gross total income less the income on which no tax is payable and less amounts eligible for deduction under the Act.
Conditions:
- Cash above ₹2,000 gets nothing. No deduction is allowed for a donation of any sum exceeding ₹2,000 unless it is paid by a mode other than cash.
- Registration must be valid on the date of donation. The Income Tax Department gives registered institutions a registration number, which should appear on the receipt. If 80G registration was not valid on that date, the donation is not eligible.
- No double claim. A deduction allowed under 80G for one assessment year cannot be claimed again, in that year or any other, under any other provision.
On the SSE. Registration requires a valid 80G registration for entities registered under Sections 12A/12AA/12AB (3.1.1), and the NSE checklist puts the onus on the entity to make clear whether a deduction is available to investors. A Chapter 10 footnote says donors bidding for ZCZP instruments on NSE SSE's e-IPO facility can contribute from ₹10,000 and avail 80G benefits. NPOs disclose their registration certificates, including 80G, in their annual disclosures (Chapter 9).
A worked example
An illustrative donor. The fund names and rules come from the workbook; the income and amounts are made up. For simplicity only one donation falls in a capped category.
Suresh Iyer, a Chennai consultant, has an adjusted gross total income of ₹8,00,000. During the year he gives:
| Donation | Category | Deduction |
|---|---|---|
| ₹40,000 to the PM's National Relief Fund, by UPI | 100%, no limit | ₹40,000 |
| ₹20,000 to the Indira Gandhi Memorial Fund, by cheque | 50%, no limit | 50% × 20,000 = ₹10,000 |
| ₹1,50,000 to the Indian Olympic Association, by bank transfer | 100%, capped at 10% of AGTI | Cap = 10% × 8,00,000 = ₹80,000; eligible = ₹80,000 |
| ₹5,000 in cash to a registered NPO | Cash above ₹2,000 | Nil |
| Total 80G deduction | ₹1,30,000 |
Check: 40,000 + 10,000 + 80,000 = ₹1,30,000. The ₹70,000 of the Olympic Association gift above the cap earns no deduction. The ₹5,000 cash gift earns nothing at all.
Had Suresh paid that ₹5,000 by UPI, it could have qualified, provided the NPO's 80G registration was valid on the day he paid.
Why NISM asks about it
Chapter 10 (Taxation, 3% weightage) is built around 80G: section 10.2 gives the four categories, the ₹2,000 cash rule, the registration-number rule and the no-double-claim rule. Its second sample question asks the maximum cash donation that qualifies (₹2,000), and its first sample question makes you separate Section 11 from 80G. Chapter 3 makes a valid 80G registration an NPO registration condition. Chapter 2 explains that an NPO can extend a deduction to donors only on 80G approval, and Chapter 9 lists 80G among the certificates an NPO discloses.
Common exam traps
- ₹2,000, not ₹10,000. ₹2,000 is the cash ceiling for a deduction. ₹10,000 is the minimum e-IPO bid for ZCZP instruments on NSE SSE. Different rules, easily swapped.
- The 10% cap is on adjusted gross total income, not on the donation and not on gross total income.
- 100% does not always mean unlimited. Family-planning donations and donations to the Indian Olympic Association are 100% but capped at 10% of adjusted gross total income.
- Registration is tested on the donation date. A registration that lapsed before the gift, or began after it, does not help.
- 80G is about the donor's deduction. The NPO's own income tax exemption comes from registration under Sections 12A/12AA/12AB and from Section 11.
- The workbook numbers registration two ways. Chapter 2 says all NPOs must be registered under Section 12A. Chapter 10 says Section 12AB. Chapter 3's eligibility condition names 12A/12AA/12AB together.
- Stale statute. The workbook cites the Income Tax Act, 1961. The Income-tax Act, 2025 replaced it from 1 April 2026 and renumbered its sections. Learn "Section 80G" for this exam, but expect a different section number in current law.
Check yourself
1.The maximum limit of donation paid in cash to qualify for deduction under Section 80G of Income Tax Act is ________.
- a)Rs. 2000
- b)Rs. 5000
- c)Rs. 10000
- d)Rs. 4000
Show the answer
Answer: (a) Rs. 2000
The workbook: no deductions are allowed in respect of donation of any sum exceeding Rs. 2000, unless such sum is paid by any mode other than cash.
Rs. 10,000 appears in the chapter too — but as the minimum ZCZP contribution through NSE SSE's e-IPO facility, not a cash limit.
2.Donations to which of the following qualify for 100% deduction under Section 80G without any qualifying limit?
- a)Indian Olympic Association
- b)PM CARES Fund
- c)Prime Minister's Drought Relief Fund
- d)A local authority for a charitable purpose other than family planning
Show the answer
Answer: (b) PM CARES Fund
PM CARES Fund is listed with the National Defence Fund and PM National Relief Fund under 100% deduction, without qualifying limit.
The Indian Olympic Association gets 100% but up to 10% of AGTI. The PM Drought Relief Fund gets 50% without limit. A local authority for other charitable purposes gets 50% up to 10% of AGTI.
3._______ of Income Tax Act provides an exemption for income derived from property held by NPO.
- a)Section 11
- b)Section 12(15)
- c)Section 80G
- d)Section 80C
Show the answer
Answer: (a) Section 11
Section 11 provides the exemption for income derived from property held by an NPO, subject to applying 85% of income to its objectives.
Section 80G is the donor's deduction, not the NPO's exemption. Section 12(15) is a distractor built from Section 12AB and Section 2(15). Section 80C is not discussed in this chapter.
Where this is taught
- Series XXIII · Chapter 10: Taxationintroduced here
- Series SEBI-ICE · Chapter 10: Tax Saving Optionsintroduced here
Related terms
- Social Stock ExchangeA separate segment of a recognised stock exchange on which Not for Profit Organisations and For Profit Social Enterprises register and list securities to raise money for social impact, under SEBI rules.
- FCRAThe Foreign Contribution (Regulation) Act, 2010 — administered by the Ministry of Home Affairs; an NPO must register under it before it can accept foreign donations.
- Not for Profit OrganisationA social enterprise that is a charitable trust, charitable society or Section 8 company (or other entity SEBI specifies); it can register on an SSE and raise money mainly through ZCZP instruments.
- Section 12ABThe current Income Tax Act registration route every NPO must hold to claim exemptions — granted first as a maximum 3-year provisional registration, then as a 5-year regular registration, replacing Section 12AA from 2021.
- Zero Coupon Zero Principal (ZCZP) instrumentA listed security issued only by an NPO registered on an SSE for a specific project; it pays no interest and returns no principal, promising the funder a social return instead.
- DARPAN portalNITI Aayog's online national database of NPOs; an NPO must register on it to be eligible for most forms of Indian government funding.
- Adjusted gross total incomeGross total income reduced by tax-exempt income and amounts already eligible for other Income Tax Act deductions — the base against which the 10% cap on certain Section 80G donations is calculated.
- Application of incomeUnder Section 11, the requirement that an NPO spend at least 85% of its yearly income on its charitable objects; the shortfall can be accumulated and applied within 5 years under conditions.
- Anonymous donationA donation whose donor's identity is not available; taxable at a flat 30% when received by a charitable NPO, other than one established wholly for religious purposes.
- Form 10BEThe certificate an NPO registered under Section 12AB must issue to a donor to support that donor's Section 80G deduction claim, as required by Rule 18AB of the Income Tax Rules.
- PhilanthropyCharitable giving as a topic an Investment Adviser raises with clients as part of estate and financial planning — a 3-step conversation the workbook sets out: start it, time it well, then follow up.