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CBDT Clarifies Deduction for Collective Donation to PM CARES FUND under section 80G to Employees through Employer


It is not uncommon to make group donation by the employees of an organization to any fund etc through their employer. Group donation is where employees donate to relief funds for a noble cause during a disaster through their employers and the employer after collecting the money from the employees donates the same to the donee/fund. Employer consolidates all donation and give single cheque to the Fund with Employer PAN but shows donation as deduction u/s 80G in the employee's Form 16.

In my earlier post, I have stated that in case an employee makes a donation to PM CARES FUND or any other fund through his employer then it is not possible for such funds to issue a separate certificate to every such employee in respect of donations made to such funds as contributions made to these funds are in the form of a consolidated cheque received from the employer.

In this context, CBDT issued a Circular No 2/2005 dated 12.01.2005 which clarifies that the claim in respect of such donations will be admissible under section 80G of the Income-tax Act, 1961 to the concerned employees on the basis of the certificate issued by the Drawing and Disbursing Officer (DDO)/ Employer in this behalf.

I had also pointed out that the Circular was issued in 2005 when the PM CARES FUND was not constituted and as such the Circular did not cover donation to PM CARES FUND.

It was also pointed out that the Finance Act, 2020 has amended the provisions relating to the allowability of deduction under section 80G. As per the amended provisions, deduction u/s 80G will be allowed to the assessee only if such donation is reflected in his Annual Information Statement (AIS) of the donee.

A question that was raised how an employee will be able to get the deduction for the group donation. The Circular of 20005 and even 4/2020 was issued when this provision was not in the statute. Even the Circular dated 16-01-2020, which deals with deduction of income tax from salary u/s 192, was issued prior to the introduction of this provision by the Finance Bill, 2020.

It was suggested that the government should allow the deduction for such group donation to the concerned employees based on the deduction allowed by the employer in his Form 16 without any separate requirement of allowability of deduction from AIS of the concerned employee.

Therefore, two issues that were required clarification has been clarified by the CBDT vide a clarification dated 09-04-2020:

1. PM CARES FUND is now included in the clarification to clarify that group donation by the employee through his employer can be allowed to the employee concerned.

2. Such deduction under section 80G for donation to PM CARES FUND shall be allowed to the concerned employee shall be allowed on the basis of deduction allowed by the employer in Form 16 of the employee.

Read the full text of the clarification dated 09-04-2020:

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