For individuals with salary income, 100% deduction for eligible donations can be claimed under section (u/s) 80GGA. However if you are a business or self employed or earning income for professional services (legal, medical, engineering, accounting, technical consultancy, interior decoration, advertising etc) or technical services (managerial , technical or consultancy services) then you cannot claim deduction for donation u/s 80GGA. For individuals with business or profession income deduction for eligible donations has to be claimed u/s 35 AC.
Section 35 AC (1) deduction for eligible donations
“ Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year. ”
The Central Government has constituted a National Committee to identify projects and schemes to be notified u/s 35AC. This committee normally consists of eminent persons. All NGOs are entitled to apply to the National Committee to get its projects or schemes approved.
Receipt for Donation
All approved NGOs are required to issue a certificate to the donor for all contributions & receipts u/s 35AC. The certificate is to be issued in Form 58A. This certificate will enable the donor to claim exemption from its taxable income.
Business / Profession income
Section 35AC is available to assessees who have income from the head ‘business’ or ‘profession’. for assessees who do not have income from business or profession, section 80GGA provides for deduction on donations made to eligible projects u/s 35AC.
Cash/ Kind/ Cheque
- The section does not mention any restrictions on donations in cash. However, the assessee will need to satisfy the requirement u/s 40 A (3) which states as follows:
“ Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. ”
- Donations in kind are not eligible for deduction.
Unlike section 80GGA, deduction u/s 35AC can be carried forward in the form of losses to next year