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March 29, 2020

Contributing to PM CARES Fund? Know How much Tax you can save in 80G and donate Generously

by facelesscompliance in Compliance Law, Corporate Law

Contributing to PM CARES Fund? Know How much Tax you can save in 80G and donate Generously

Update 10 April: CBDT has clarified that deduction u/s. 80G will be allowed to individual employees in respect of consolidated donation made to PM CARES FUND on the basis of Form 16 issued by the employer.

Employer while Making Form 16 for Employees can consider this deduction from total income of employee. Futher employee may choose to claim deduction in FY 19-20 or FY 20-21

Update 31 March : Govt clarifies PM Cares Fund is 100% Exempt Update as on 31 March 2020

Now you can donate to PM CARES Fund and get 100% Tax benefit for Financial Year 2019-20 Till June 2020. So Now even if you donate after 31 March till 30 June 2020 you can claim deduction in FY 2019-20.

Also there is no limit on donation bases on total income, you can donate any amount irrespective of income and claim 100%

The pandemic of COVID-19 has engulfed the entire world and has posed serious challenges for the health and economic security of millions of people worldwide. In India too, the spread of coronavirus has been alarming and is posing severe health and economic ramifications for our country.

Keeping in mind the need for having a dedicated national fund, a public charitable trust under the name of ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund)’ has been set up. Prime Minister is the Chairman of this trust and its Members include Defence Minister, Home Minister and Finance Minister.

PM Narendra Modi has always believed and shown in actions that public participation is the most effective way to mitigate any issue and this is yet another example. This fund will enable micro-donations as a result of which a large number of people will be able to contribute with smallest of denominations.

Citizens and organisations can go to the website pmindia.gov.in and donate to PM CARES Fund using basic details

DO NOT FORGET TO MENTION PAN TO CLAIM INCOME TAX DEDUCTION

The form to file the has option to mention PAN Number of the Individual or Company or Any entity which is circled in read. All who want to claim deduction must compulsory disclose the PAN Number. Further to claim deduction in 80G Complete Name and Address is to be correctly mention

When you can claim deduction? in FY 2019-20 or FY 2020-21?

The timing of the donation is very important, if you wish to claim deduction in 80G in Financial Year 2019-20 then you have to make donation before 31 March 2020

Incase you want to claim donation as deduction in next Financial Year 2020-2021, then you can pay donation anytime after 1 April 2020

You can even split the amount and make donation twice once before 31 March to claim in FY 2019-20 and Once after 1 April to claim in FY 2020-21

What will be Quantum of Deduction in 80G for PM’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)?

The Donations made will be eligible for 100% Deduction under section 80G in line with Prime Minister National Relief Fund. Though Government has not issued any clarification yet, however it is assumed that it will be in line with Prime Minister National Relief Fund, Donations Eligible for 100% Deduction Without Qualifying Limit

Who all can claim Deduction ?

All Individual, HUF, Firm, LLP, Private and Public Companies, and Trust will get the deduction ( For Public Trust it can even claim as application of Income). The Deduction amount will be 100% of Donation

How Much Individual or HUF will save Tax if Donation is made?

Individual Total Income Amount of Donation RSIndividual Highest Tax SlabTax Saving
Less than 5 Lakhs 10,000 0% 0
5 to 10 Lakhs10,00020% 2,000
More than 10 Lakhs10,00030% 3000

The above calculation has not consider the cess paid by Individual, if it is taken the savings in tax would be higher.

Our suggestion is if you have taxable income in highest bracket, For example if you are donating 1 Lakh, so your tax savings come approx Rs 30,000/-. Ideally you should donate 1,30,000/- or forgo to claim deduction of 80G so that effectively you can contribute more

For Companies The MCA has issued a OFFICE MEMORANDUM Clarification on contribution to PM CARES Fund as eligible CSR activity under item no. (viii) of the Schedule VII of Companies Act, 2013.

Item no. (viii) of the Schedule VII of the Companies Act, 2013, which enumerates activities that may be undertaken by companies in discharge of their CSR obligations, inter alia provides that contribution to any fund set up by the Central Government for socio-economic development and relief qualifies as CSR expenditure. The PM-CARES Fund has been set up to provide relief to those affected by any kind of emergency or distress situation. Accordingly, it is clarified that any contribution made to the PM CARES Fund shall qualify as CSR expenditure under the Companies Act 2013.

Every Company including its holding or subsidiary having:

  • Net worth of Rs. 500 Crore or more, or
  • Turnover of Rs. 1000 crore or more, or
  • Net Profit of Rs. 5 crore or more

has to spend, in every financial year, at least 2% of the average net profits of the company made during the 3 immediately preceding financial years, in pursuance of its CSR Policy.

Accordingly any contribute made by Private or Public or Foreign Company to PM CARES Fund shall be eligible to claim as CSR Activities.

Update as on 30 March 2020

There are unconfirmed news as reported in twitter handle as below as deduction under PM CARES FUND is limited to 50% under Section 80G(12A) with overall cap of 10% of gross total income

However Many professionals Chartered Accountants have urged PM and FM to reconsider and allow 100% deduction

We request to subscribe to updates we will keep you posted any development or clarification from Income Tax Department

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