If you wish to save tax for FY2024-25 then there is still time. However, if you are looking for avenues to save taxes for the financial year, then Section 80G may be beneficial for you in this regard. But you must make a donation to a government-specified eligible trust to avail the benefit (not all donations made to trusts qualify for the Section 80G tax deduction automatically).
One such eligible trust is the Shri Ram Janmabhoomi Teerth Kshetra Trust; all online donations and cash contributions up to Rs 2,000 made to this trust qualify for a Section 80G tax deduction, provided the individual has opted for the old tax regime. Donating to this trust allows you to get a tax deduction of up to 50% of the amount under the old tax regime. The emphasis is on the word ‘up to’, as not every individual will be able to claim the full 50% of the donation amount as a tax deduction.
Read below to know more about Section 80G and why the tax deduction is capped at a maximum of 50% of the donation made to Ayodhya Ram Mandir.
What are the reasons for the maximum 50% tax deduction allowed for donations made to Ayodhya Ram Mandir?
There are three things at play here:
Section 80G (the section which determines how much income tax deduction to give for which deduction)
Qualifying limit dependent on gross total income (provision introduced by the government)
Mode of contribution—online/offline
All three things mentioned above will be collectively used to determine how much deduction you can claim for such a donation.
Section 80G—maximum 50% for donation to Ayodhya Ram Mandir
According to Amit Maheshwari, Tax Partner at tax and consulting firm AKM Global, donations made to the Ayodhya Ram Mandir through the Shri Ram Janmabhoomi Teerth Kshetra Trust are eligible for a 50% deduction under Section 80G.
“This is because the trust has been notified under sub-clause (b) of Section 80G (2), making donations for the renovation or repair of the temple eligible for tax deductions. However, contributions towards other activities, such as religious events or social welfare initiatives, do not qualify for this deduction,” says Maheshwari.
Qualifying limit—10% of gross total income
According to Gaurav Jain, Partner, Direct Tax at Forvis Mazars – India, this 50% deduction mentioned above is subject to the qualifying limit of 10% of your adjusted gross total income (GTI). Any donation amount exceeding this 10% limit will not be qualified for deduction.
The adjusted gross total income is calculated by subtracting all deductions under Sections 80C to 80U (excluding Section 80G itself) and any income subject to short-term and long-term capital gains from the GTI. “This means that while 50% of the donated amount is eligible for deduction, the actual amount deductible cannot exceed 10% of the adjusted GTI,” says Maheshwari.
Maheshwari explains using an example:
Mr. A has a gross total income of Rs 8,00,000 and is eligible for the 80C deduction of Rs 1,50,000 and the 80E deduction of Rs 3,00,000. He donated Rs 40,000 to Ayodhya Ram Mandir through online means.
His adjusted GTI is Rs 8,00,000-(Rs 1,50,000+ Rs 3,00,000) = Rs 3,50,000
The 10% qualifying limit on this income is Rs 35,000. Since Mr. A donated Rs 40,000 to the Ayodhya Ram Mandir, he is eligible to claim 50% of the donation amount as a deduction, which comes to Rs 20,000. Since the donation amount is within the qualifying limit of Rs 35,000, the entire Rs 20,000 is deductible.
In a similar way, we can understand the case of donation above the 10% threshold. Had the donation been Rs 80,000, then the 50% amount would be Rs 40,000. However, it would have been above the 10% qualifying income of Rs 35,000. So, the maximum deduction allowed in this case would only be Rs 35,000.
Mode of contribution—online/offline
Donations made in cash exceeding Rs 2,000 are not qualified for deduction, and donations in kind are not qualified for deduction under Section 80G. Donors can claim a deduction for donations made through cash or cheque, but not for donations in kind.
This trust also offers an online facility for donation that can be utilised by taxpayers. There is no limit on the maximum amount of donation when it comes to online payment.
Hence, when all three factors (80G, 10% gross total income, and mode of donation) are collectively checked, donations to Ayodhya Ram Mandir for renovation or repair purposes are eligible for only up to 50% of the donated amount.
The Central Board of Direct Taxes (CBDT), in a circular dated May 8, 2020, said: “The Central Government hereby notifies ‘SHRI RAM JANMABHOOMI TEERTH KSHETRA’ (PAN: AAZTS6197B) to be a place of historic importance and a place of public worship of renown for the purposes of the said section from the year F.Y. 2020-2021, relevant to the Assessment Year 2021-2022.”
No requirement of Form 10BE for donation to Ayodhya Ram Mandir
When a taxpayer claims the tax deduction under Section 80G, the trust is required to report the donation to the tax department through Form 10BD and to issue Form 10BE to the taxpayer who made the donation. However, for Ayodhya Ram Mandir, there is no such requirement to give Form 10BE. Taxpayers can still claim a Section 80G tax deduction for such donations even without this form.
Chartered Accountant Ashish Karundia explains: “The obligation to submit donation details in Form 10BD by the institution or fund and issue a corresponding certificate in Form 10BE (which includes the ARN) applies only to institutions or funds approved under 80G(2)(a)(iv) of the Income-tax Act, 1961. It is important to note that the ‘Sri Ram Janmabhoomi Teerth Kshetra’ is recognised by the Central Government under 80G(2)(b) of the Income-tax Act, 1961, and therefore, there is no need to issue a donation certificate in Form 10BE.”
Will your ITR come under scrutiny for claiming a Section 80G tax deduction with an ARN number?
When a taxpayer donates money, the trust has to give an ARN number, which is then quoted by the taxpayer in his/her ITR. But since the Ayodhya Ram Mandir is not required to give Form 10BE, hence no ARN number will also be given.
Karundia says: “The taxpayer’s ITR will be processed successfully if he/she claims an 80G deduction for a donation to the Sri Ram Janmabhoomi Teerth Kshetra, even without the ARN being mentioned for the donation.”
Chartered Accountant Ashish Niraj, Partner, A S N & Company, reiterated that since the Form 10BE Certificate is not required in the case of donations made to the Ram Janmabhoomi Teerth Kshetra, there is no requirement of an ARN number.
“For Section 80G donations where Form 10BE is required, ARN helps the tax department to cross-verify the claim of 80G donation. Therefore, chances of getting a tax notice are on the lower side for such cases. Where 10BE ARN is not required, the assessee can skip that and fill in other details in his/her ITR. If the department makes a query, then the taxpayer can produce the receipt of the Ram Janmabhoomi Teerth Kshetra; it will be valid,” says Niraj.
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