Section 80G Deductions: Are Charitable Donations Still Tax-Deductible in 2026?

Key Takeaways

• Continued Benefit Under New Law: The upcoming Direct Tax Code (DTC) 2025, which replaces the Income Tax Act, 1961, is expected to retain the provision for tax deductions on charitable donations, corresponding to the existing Section 80G.
• No Deduction in New Tax Regime: It is critical to note that the deduction for charitable donations under Section 80G is permissible only for taxpayers who opt for the Old Tax Regime. This deduction is not available under the New Tax Regime.
• Enhanced Reporting Requirements: Starting from the Assessment Year 2026-27, taxpayers claiming this deduction must provide additional details in their Income Tax Return (ITR), including the transaction reference number (for UPI, NEFT, RTGS, etc.) and the IFSC code of the bank, to enhance transparency and prevent fraudulent claims.
• Structural Changes in Approval: The Direct Tax Code, 2025, aims to streamline the approval process for charitable organizations. The standalone Section 80G approval is being absorbed into a unified Registered Non-Profit Organisation (RNPO) framework, linking donor eligibility directly to the organization's status as an RNPO.

PART 1: EXECUTIVE SUMMARY

This compliance guide addresses the continuity and procedural modifications concerning tax deductions for charitable donations, transitioning from Section 80G of the Income Tax Act, 1961, to the newly legislated Direct Tax Code (DTC) 2025, effective April 1, 2026. Our focus is to provide clarity on whether these tax benefits will persist and outline the updated compliance landscape for the financial year 2025-26 and beyond.

• The Old Law (1961): Under the Income Tax Act of 1961, Section 80G has been a long-standing provision allowing taxpayers (individuals, HUFs, companies) to claim deductions for contributions made to specified charitable institutions and relief funds. The deduction could be either 50% or 100% of the donated amount, sometimes subject to a qualifying limit of 10% of the Adjusted Gross Total Income. A key prerequisite for claiming this deduction has been the taxpayer's choice to be assessed under the Old Tax Regime.

• The New Law (2025): The Direct Tax Code, 2025, which is set to replace the 1961 Act, aims to simplify and consolidate direct tax laws. While the DTC intends to eliminate many exemptions and deductions, the core benefit of a tax deduction for charitable donations is expected to continue under a corresponding provision, Clause 133 of the Income Tax Bill, 2025. The fundamental structure of allowing 50% or 100% deductions remains. However, the approval mechanism for institutions is being streamlined into a unified RNPO framework, shifting from a separate 80G approval to a system where donor deduction eligibility is a consequence of the institution's RNPO status.

• Who is Impacted: This transition impacts all taxpayers—individuals, companies, and other entities—who make charitable donations and wish to claim a tax deduction. The most significant impact will be on those who need to adapt to the new, more stringent reporting requirements for ITR filing from Assessment Year 2026-27 onwards. Furthermore, charitable trusts and institutions will be affected by the new unified registration and compliance framework under the RNPO system. Taxpayers must also remain aware that these deductions are exclusively available to those who have not opted for the simplified New Tax Regime.

PART 2: DETAILED TAX ANALYSIS

1. Introduction to the Deduction

Section 80G of the Income Tax Act, 1961, has served as a cornerstone of India's fiscal policy to encourage philanthropy. It provides a tax incentive for taxpayers who contribute to specified charitable funds and institutions. The deduction is available to all categories of taxpayers, including individuals, Hindu Undivided Families (HUFs), and companies. The primary objective of this provision is to reduce the donor's taxable income, thereby lowering their overall tax liability, while simultaneously channeling funds towards social welfare and relief activities.

The deduction under Section 80G is not uniform and is subject to specific conditions and limits. Donations are broadly categorized as follows:

• Donations eligible for 100% deduction without any qualifying limit: This category typically includes contributions to government-established funds like the National Defence Fund and the Prime Minister's National Relief Fund.
• Donations eligible for 50% deduction without any qualifying limit: Donations to funds such as the Prime Minister's Drought Relief Fund fall under this category.
• Donations eligible for 100% deduction subject to a 10% qualifying limit of Adjusted Gross Total Income.
• Donations eligible for 50% deduction subject to a 10% qualifying limit of Adjusted Gross Total Income: Most donations to registered NGOs and charitable trusts fall into this category.

It is crucial to understand that donations in kind, such as food or clothing, are not eligible for this deduction; only monetary contributions qualify. Furthermore, cash donations exceeding ₹2,000 are not allowed for deduction, necessitating payment through banking channels like cheque, draft, or digital modes.

2. 1961 Act vs. Direct Tax Code 2025 Status

The transition from the Income Tax Act, 1961, to the Direct Tax Code (DTC), 2025, represents a significant overhaul of India's direct tax system. The DTC aims to simplify the legal framework, reduce litigation, and phase out many exemptions to broaden the tax base. A key question for philanthropists and taxpayers is the fate of the popular Section 80G deduction.

Under the Income Tax Act, 1961:

• Deduction Availability: Section 80G is a prominent deduction under Chapter VI-A.
• Tax Regime: The benefit is exclusively available to those taxpayers who opt for the Old Tax Regime. It is explicitly disallowed under the New (default) Tax Regime.
• Approval: Charitable institutions are required to obtain separate registration under Section 12A/12AA/12AB for tax exemption on their income and a distinct approval under Section 80G to be able to provide tax-deductible receipts to their donors.

Under the Direct Tax Code, 2025 (effective April 1, 2026):

• Continuity of Benefit: The principles of Section 80G are proposed to be continued. The Income Tax Bill, 2025, contains provisions (such as Clause 133) that correspond to Section 80G, ensuring that the incentive for charitable giving is not eliminated.
• Unified Framework: A major structural change is the integration of the donor deduction approval process into the primary registration of the charitable entity. The concept of a separate Section 80G approval is being replaced by the Registered Non-Profit Organisation (RNPO) framework. An institution's status as an RNPO will inherently determine its eligibility to receive tax-deductible donations. This moves from a dual-approval system to a unified, compliance-based one.
• Deduction Limits: The existing structure of allowing 50% or 100% deductions, with or without a qualifying limit, is expected to remain largely the same.

Table: Comparative Analysis

3. Impact on Personal Finance & Investments

The continuation of tax benefits for charitable donations under the DTC 2025 ensures that this avenue for tax planning and social contribution remains viable. For high-income individuals, charitable giving is an effective tool to reduce taxable income. The tax benefit is directly proportional to the taxpayer's applicable slab rate under the Old Tax Regime.

For example, a donation of ₹1,00,000 to an NGO eligible for a 50% deduction (subject to qualifying limits) would result in a deduction of ₹50,000. For a taxpayer in the 30% tax bracket, this translates to a direct tax saving of ₹15,000 (plus applicable surcharge and cess). This financial incentive often encourages larger donations, thereby positively impacting the funding of non-profit organizations.

However, the key consideration for taxpayers post-2025 will be the choice between the Old and New Tax Regimes. The New Tax Regime offers lower slab rates but forgoes most deductions, including the one for charitable donations. Taxpayers must perform a cost-benefit analysis. If the total deductions they can claim (including 80G, 80C, etc.) result in a lower tax liability under the Old Regime compared to the New Regime, they should opt for the former. The decision will influence how individuals allocate funds for both investment and philanthropic purposes.

4. Proof Submission & ITR Filing Steps

The process of claiming the deduction for charitable donations has become more stringent, with an emphasis on digital verification to curb fraudulent claims.

Documentation Required (Mandatory Proof):

1. Donation Receipt: A stamped receipt issued by the charitable trust/institution is mandatory. The receipt must contain:
   • Name, address, and PAN of the trust.
   • Name of the donor.
   • Amount donated (in figures and words).
   • The institution's Registration Number under the Income Tax Act.
2. Form 10BE / Donation Certificate: The donee institution is required to file a statement of donations received and issue a certificate (Form 10BE) to the donor. This allows the tax department to cross-verify the claims made by the taxpayer.

New ITR Filing Steps (Applicable from AY 2026-27): With effect from the financial year 2025-26, the Income Tax Return forms have been updated to capture more granular details of the donation. When filing the ITR, taxpayers must provide the following in Schedule 80G:

• Name and PAN of the Donee.
• Address of the Donee.
• Amount of Donation.
• Transaction Reference Number: For donations made via UPI, IMPS, NEFT, or RTGS.
• IFS Code: The IFSC of the bank through which the donation was made.

This increased demand for information means taxpayers must diligently maintain records of their online transactions, including bank statements and digital payment receipts, to substantiate their claims during ITR filing.

Step-by-Step ITR Claim Process:

1. Choose the Old Tax Regime: Ensure you have opted out of the New Tax Regime while filing your ITR.
2. Gather Documents: Collect all donation receipts and Form 10BE from the respective institutions.
3. Calculate Adjusted Gross Total Income (AGTI): This is required for donations that are subject to a qualifying limit. AGTI is your Gross Total Income minus all other deductions under Chapter VI-A (except Section 80G) and certain special incomes.
4. Determine the Qualifying Limit: Calculate 10% of your AGTI.
5. Fill Schedule 80G: Carefully enter the details for each donation, including the PAN of the donee and the new transaction details (reference number, IFSC). The ITR utility will auto-calculate the eligible deduction amount based on the information provided.
6. Verify and Submit: Ensure the total deduction claimed matches your calculations and the details pre-filled from Form 10BE (if available) in your Annual Information Statement (AIS).

5. Conclusion

The transition to the Direct Tax Code, 2025, maintains the tax benefits for charitable donations, underscoring the government's continued support for philanthropy. While the core incentive under the erstwhile Section 80G remains, the compliance framework has been significantly strengthened. The integration into a unified RNPO system for institutional approvals and the mandatory disclosure of transaction details in ITR forms mark a move towards greater transparency and accountability. Taxpayers must ensure meticulous record-keeping and be mindful of the exclusive availability of this deduction under the Old Tax Regime to continue leveraging this provision for effective tax planning in 2026 and beyond.

💡 Deduction Tip: Carefully review which Section 80 deductions have survived the transition to the Direct Tax Code 2025.