Deduction with respect to donations to certain specified funds, charitable institutions, etc is allowable to any taxpayer (individual, company, firm or any other person). Donations paid to such specified institutions qualify for tax deduction subject to certain ceiling limits. Based on limits, all eligible donations have been broadly divided into four categories: 1)      100% deduction without any qualifying limit. 2)      50% deduction without any qualifying limit. 3)      100% deduction subject to 10% of adjusted gross total income (qualifying limit). 4)      50% deduction subject to 10% of adjusted gross total income (qualifying limit). Donation to 1^st category institutes includes:

• Prime Minister’s National Relief Fund
• National Defense Fund
• Prime Minister’s Armenia Earthquake Relief Fund
• The Africa (Public Contribution – India) Fund
• The National Foundation for Communal Harmony
• Approved university or educational institution of national eminence
• The Chief Minister’s Earthquake Relief Fund, Maharashtra
• Donations made to Zila Saksharta Samitis.
• The National Blood Transfusion Council or a State Blood Transfusion Council.
• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.

Donation to 2^nd category institutes includes:

• Jawaharlal Nehru Memorial Fund
• Prime Minister’s Drought Relief Fund
• National Children’s Fund
• Indira Gandhi Memorial Trust
• The Rajiv Gandhi Foundation

Donation to 3^rd category institutes includes:

• Donations to the Government or a local authority for the purpose of promoting family planning.
• Sums paid by a company to Indian Olympic Association

Donation to 4^th category institutes includes:

• Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.

Deduction Limit: For third and fourth category institutions, deduction is limited to 10% of the “Adjusted Gross Total Income”. The ‘adjusted gross total income’ for this purpose is the gross total income reduced by any amount deductible under Sections 80CCC to 80U (but not Section 80G), any exempt income and long term capital gains, if any. Points to be noted:

• Only donations made in cash or cheque are eligible for deductions. Donations made in kind, in the form of food, clothing, medicines etc are not eligible.
• Donations to foreign charitable trusts or to political parties are not eligible for any deduction.
• Non Resident Indians are also entitled to claim tax benefits against donations, subject to the donations being made to eligible institutions and funds.

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