The Income Tax Department has made it clear that employees are entitled to claim tax deductions for donations to PM CARES Fund and the mechanism to get the benefit will be different from the existing provision.

The fund intends to deal with any kind of emergency or distress situation like the one posed by the Covid-19 pandemic and to provide relief to the affected. The fund consists entirely of voluntary contributions from individuals/organisations and does not get any budgetary support. Donations would qualify for 80G benefits for 100 per cent exemption under the Income Tax Act, 1961. Donations will also qualify to be counted as Corporate Social Responsibility (CSR) expenditure under the Companies Act, 2013.

The Central Board of Direct Taxes (CBDT) has clarified that in cases where donation is made to the Fund by any employee through his/her employer, the Fund may not be able to issue separate certificate to every such employee in respect of the donations so made, as the contributions made to the fund are in the form of a consolidated payment. “The deduction in respect of such donations … will be admissible u/s. 80G of the Act (Income Tax Act) on the basis of the Form 16/Certificate issued by the Drawing & Disbursing Officer [DDO] / Employer in this regard,” it said.

According to Shailesh Kumar, Director at Nangia Andersen Consulting, in many cases, the employees are donating a portion of their salary (viz. 1 day or 1 week or 1 month, etc.) to the fund, through their employers. However, in all such cases, where the actual donation is made by employees, the consolidated donation receipt is issued in name of the employer, as it goes into the fund through the employers’ account.

In all such cases, Form 16 issued by the employer will be considered to be a conclusive evidence of donation made by employee and tax deduction under section 80-G shall be allowed. “This move and will encourage employees to donate for this noble cause through their employers, at the same time make them eligible for tax benefit of such donation,” he said.

In normal 80G cases, taxpayers have to file the returns with details and claim the tax refund. However, for PM CARES Fund, it will be automatic.

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