Understanding which donations are eligible under Section 80G is only half the process. The actual tax benefit depends on how the deduction is calculated, especially when certain donations are subject to limits. Many taxpayers make mistakes at this stage by assuming that the entire donation amount is always deductible.
This article explains how deduction under Section 80G is calculated, the concept of Adjusted Gross Total Income (Adjusted GTI), and how qualifying limits affect the final deduction amount.
Why Calculation Under Section 80G Is Not Straightforward
Section 80G does not follow a flat deduction rule. Instead, the deduction depends on:
The category of donation (100% or 50%)
Whether the donation is subject to a qualifying limit
The donor’s Adjusted Gross Total Income
Because of these variables, the deductible amount may be less than the amount actually donated.
Step 1: Compute Gross Total Income (GTI)
The calculation begins with determining your Gross Total Income (GTI), which includes income from all applicable heads, such as:
Salary
House property
Business or profession
Capital gains
Income from other sources
At this stage, no deductions under Chapter VI-A (including Section 80G) are applied.
Step 2: Calculate Adjusted Gross Total Income (Adjusted GTI)
Adjusted GTI is a key concept for Section 80G and is used to determine whether the qualifying limit applies.
Adjusted GTI is calculated by reducing the following amounts from Gross Total Income:
Deductions under Chapter VI-A other than Section 80G
Exempt income
Long-term capital gains
Short-term capital gains taxable under section 111A
Income taxed under special provisions such as sections 115A, 115AB, 115AC, 115AD, and 115D
The resulting figure is called Adjusted Gross Total Income.
Step 3: Determine the Qualifying Limit
Certain categories of donations under Section 80G are subject to an overall ceiling, commonly referred to as the qualifying limit.
The qualifying limit is calculated as a percentage of Adjusted GTI
All donations falling under “subject to limit” categories are aggregated
The deduction cannot exceed this calculated limit, even if the actual donation amount is higher
Donations that are not subject to any limit are excluded from this step and are fully considered separately.
Step 4: Categorise Donations Correctly
Before calculating the deduction amount, donations must be grouped into the following four categories:
100% deduction without qualifying limit
50% deduction without qualifying limit
100% deduction subject to qualifying limit
50% deduction subject to qualifying limit
Each category is treated differently in the calculation process.
Step 5: Calculate Deduction for Each Category
Donations Without Qualifying Limit
For 100% category: the entire eligible donation is deducted
For 50% category: half of the eligible donation is deducted
These deductions are allowed independently of income level.
Donations Subject to Qualifying Limit
Aggregate all donations falling under “subject to limit” categories
Compare the total with the qualifying limit
Deduction is restricted to the lower of the two
Apply 100% or 50% rate, depending on the category
Any excess donation beyond the qualifying limit does not provide tax benefit.
Illustrative Example (Conceptual)
Assume:
Adjusted Gross Total Income: ₹10,00,000
Qualifying limit: 10% of Adjusted GTI = ₹1,00,000
If a taxpayer donates:
₹40,000 to a donation eligible for 100% without limit
₹1,20,000 to donations subject to qualifying limit
Then:
₹40,000 is fully deductible
Only ₹1,00,000 is considered for limited donations
Any donation beyond ₹1,00,000 is ignored for deduction
The final deduction depends on whether the limited donation qualifies for 100% or 50%.
Common Mistakes in Section 80G Calculation
Some frequent errors taxpayers make include:
Applying the qualifying limit to all donations
Ignoring Adjusted GTI and using Gross Total Income instead
Assuming unused donation amounts can be carried forward
Applying 100% deduction without checking category
These mistakes often result in incorrect claims and possible disallowance.
Why Excess Donation Cannot Be Carried Forward
Section 80G does not permit carry forward of:
Excess donation beyond qualifying limit
Unclaimed deduction due to insufficient income
If the donation exceeds the permissible deduction in a year, the excess amount is simply ignored for tax purposes.
Key Takeaways
Deduction under Section 80G depends on Adjusted GTI and donation category
Some donations are subject to an overall qualifying limit
Excess donation beyond the limit is not deductible
Correct classification is essential for accurate calculation
Calculation errors can lead to denial of deduction
In the next article, we will cover important rules, restrictions, and edge cases under Section 80G, including cash donation limits and situations where deductions are disallowed.
Reference:
Income Tax Department’s FAQs on Section 80G Deduction dated 18/12/2025