Section 80G donations: the Rs 2,000 cash ceiling, the 10% AGTI limit and the Form 10BE certificate

Every March, thousands of taxpayers write a cheque to a charity in the last week of the financial year and assume the full amount will shrink their tax bill. Under Section 80G of the Income-tax Act, 1961, that assumption is frequently wrong. Some donations qualify for a 100% deduction, others for only 50%, and a large sub-set is squeezed by a ceiling of 10% of your Adjusted Gross Total Income. Add the Rs 2,000 cash rule and the mandatory Form 10BE certificate introduced from FY 2021-22, and the gap between what you gave and what you can lawfully claim can be substantial. This guide walks through the statute, a full worked example for FY 2025-26, and the errors that surface most often in ITR scrutiny.

What the Section Says

Section 80G allows a deduction from your gross total income for sums donated to notified funds and charitable institutions. Per the statute reproduced at indiacode.nic.in, the deduction is either 50% or 100% of the qualifying donation, and one broad band of donees is further restricted to a qualifying limit of 10% of Adjusted Gross Total Income. This is a tax deduction, not a rebate, so it reduces the income on which tax is computed rather than the tax itself.

Two threshold conditions apply to every claim. First, per the Income Tax Department's guidance, any donation made in cash exceeding Rs 2,000 earns no deduction at all; this ceiling was cut from Rs 10,000 to Rs 2,000 by the Finance Act 2017 with effect from AY 2018-19. Second, donations in kind, such as food, clothes, medicines or gadgets, have never qualified under Section 80G regardless of value.

Since AY 2022-23, a documentary condition has hardened the position. The donee institution must file a statement of donations in Form 10BD and issue the donor a certificate in Form 10BE, both due by 31 May following the financial year of the donation. If your PAN does not appear in the donee's Form 10BD filing, the deduction can be denied even where you hold a receipt.

Crucially, Section 80G is available only under the old tax regime. A taxpayer who opts for the concessional regime under Section 115BAC forfeits the Section 80G deduction entirely, so the decision to donate for tax purposes is inseparable from the old-versus-new regime choice.

The four deduction buckets

The rate and the cap depend on which of four categories the donee falls into. The table below summarises the structure.

The single most misread line here is the cap column. Donations to the funds in categories A and B are deductible without any ceiling; the 10% of Adjusted Gross Total Income limit bites only on the aggregate of category C and category D donations.

How Adjusted Gross Total Income is built

Adjusted Gross Total Income (AGTI) is not the same as total income. Start with gross total income and subtract the items in the table below.

Because long-term capital gains are stripped out before the 10% cap is applied, a taxpayer with a large one-off property or equity gain in FY 2025-26 will find their 80G headroom is smaller than their headline income suggests.

Worked Example

Consider Rohan, a salaried employee filing for FY 2025-26 (AY 2026-27) under the old regime. His numbers, before any 80G claim, are set out below.

During the year Rohan made three donations: Rs 50,000 by cheque to the PM CARES Fund (category A), Rs 2,00,000 by bank transfer to an approved NGO (category D), and Rs 5,000 in cash to the same NGO's street collection.

The Rs 5,000 cash gift is disallowed outright because it exceeds the Rs 2,000 cash ceiling. The Rs 50,000 to PM CARES Fund is deductible at 100% with no cap, giving Rs 50,000. The Rs 2,00,000 NGO donation sits in category D, so it is first restricted to the qualifying limit of Rs 1,22,500 (10% of AGTI of Rs 12,25,000) and then allowed at 50%, giving a deduction of Rs 61,250. His total Section 80G deduction is therefore Rs 1,11,250, not the Rs 2,55,000 he actually parted with.

At Rohan's marginal rate of 30% plus 4% cess, the Rs 1,11,250 deduction saves roughly Rs 34,710 in tax. You can model the effect on your own slab using the income tax calculator before you decide how much to give. Had Rohan opted for the new regime, his Section 80G deduction would have been zero, which is exactly the scenario the old-versus-new comparison is built to expose.

Common Mistakes

The pitfalls below recur in assessment and in defective-return notices under Section 139(9), and each has a specific fix.

Claiming cash donations above Rs 2,000. A Rs 5,000 cash receipt does not become half-deductible; the whole donation is disallowed. Since AY 2018-19 the only safe route for anything above Rs 2,000 is a traceable mode such as cheque, UPI, card or bank transfer.

Treating in-kind gifts as deductible. Donating blankets worth Rs 40,000 to a shelter yields no 80G deduction, because the section has always excluded donations in kind. Only money qualifies.

Applying the 10% cap to the wrong donees. A Rs 3,00,000 gift to the PM National Relief Fund is fully deductible even if it exceeds 10% of AGTI, because that fund sits in category A. Applying the cap here needlessly understates the claim.

Claiming 80G under the new regime. Taxpayers who default into the Section 115BAC regime for FY 2025-26 sometimes still enter an 80G figure; the deduction is simply ignored and can trigger a mismatch. Confirm your regime before filing your ITR.

Ignoring Form 10BE. From AY 2022-23, a receipt alone is not enough. If the donee has not filed Form 10BD by 31 May and issued you Form 10BE, expect the claim to be flagged, much like the TDS mismatches that surface against Form 26AS. Always reconcile your donation certificate before you file.

Confusing 50% and 100% rates. Assuming every charity gives a 100% deduction is the most common arithmetic error. Most approved NGOs fall in category D at 50%, so a Rs 1,00,000 donation there is worth a Rs 50,000 deduction at most, before the AGTI cap.

If you have already filed and later discover a genuine omission, remember that relief avenues such as condonation of delay under Section 119(2)(b) exist for specific situations, and senior citizens should separately check reliefs like Section 80TTB on deposit interest.

FAQ

Can I claim Section 80G in the new tax regime for FY 2025-26?

No. Section 80G is one of the deductions withdrawn under the concessional regime in Section 115BAC. For FY 2025-26 the deduction is available only if you file under the old regime, so run the old-versus-new calculator before deciding.

What is the maximum cash donation eligible under 80G?

Rs 2,000. Any single cash donation above Rs 2,000 is fully disallowed, a limit in force since AY 2018-19. Use a bank channel for larger amounts so the payment is traceable.

Is every donation deductible at 100%?

No. Only funds in the no-cap 100% category, such as the PM CARES Fund and the National Defence Fund, give a full 100% deduction. Most registered charities fall in the 50% category and are additionally capped at 10% of Adjusted Gross Total Income.

What is Form 10BE and when must I receive it?

Form 10BE is the donation certificate the donee institution must issue after filing its Form 10BD statement, both due by 31 May following the financial year of the donation. From AY 2022-23, your 80G claim depends on the donation appearing in that filing against your PAN.

How is the 10% AGTI cap calculated?

Take your gross total income, remove all Chapter VI-A deductions except 80G, then remove long-term capital gains, Section 111A short-term gains and specified special-rate incomes. Ten per cent of the resulting Adjusted Gross Total Income is the ceiling on category C and D donations combined.

Do donations in kind qualify?

No. Gifts of goods, food, clothing or equipment earn no deduction under Section 80G. Only monetary donations, subject to the Rs 2,000 cash rule, are eligible.

Does a large capital gain reduce my 80G limit?

Yes. Because long-term capital gains and Section 111A short-term gains are excluded when computing Adjusted Gross Total Income, a big capital gain in the year lowers the base against which the 10% cap is measured, shrinking the deductible portion of your capped donations.