IILUSTRATION OF BENEFITS UNDER SECTION 80G
The persons or organisation who donate under section 80G gets a deduction of 50% from their taxable income. Here at times a confusion creeps in, that the tax advantage under section 80G is 50%, but actually it is not so. 50% of the donation made is allowed to be deducted from the taxable income and consequently tax is calculated.
The ultimate benefit will depend on the tax rates applicable to the assessee. Let us take an illustration. Mr. X an individual and M/s. Y Pvt. Ltd., a Company both give donation of Rs. 1,00,000/- to a NGO called Satyakaam. The total income for the year 2003-2004 of both Mr. X and Ms. Y Pvt. Ltd. is Rs. 2,00,000/-. Now assuming that the rates are 30% for the individuals and 40% for the Companies without any minimum exemption limit. The tax benefit would be as shown in the table :
| Mr. X | MS. Y Pvt. Ltd. | |
| i) Total Income for the year 2003-2004 | 2,00,000.00 | 2,00,000.00 |
| ii) Tax payable before Donation | 60,000.00 | 80,000.00 |
| iii) Donation made to charitable organisations | 1,00,000.00 | 1,00,000.00 |
|
iv) Qualifying amount for deduction (50% of donation made)
|
50,000.00 | 50,000.00 |
|
v) Amount of deduction u/s 80G (Gross Qualifying Amount subject to a maximum limit 10% of the Gross Total Income)
|
20,000.00 | 20,000.00 |
| iv) Taxable Income after deduction | 1,80,000.00 | 1,80,000.00 |
| v) Tax payable after Donation | 54,000.00 | 72,000.00 |
| vi) Tax Benefit U/S 80G (ii)-(v) | 6,000.00 | 8,000.00 |
Note : The tax rates and mode of computation is not actual
