ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. All donations, however, are not eligible for deductions under section 80G. Only donations made to prescribed funds qualify as a deduction.

Detailed explanation-2: -The amount of general donation is an income and we credit it to Income and Expenditure Account. Specific Donation: In case the donor specifies the purpose for which the donation should be used, it is a Specific Donation. For example, a donor donates ₹ 10, 00, 000 for the library.

Detailed explanation-3: -Donations are considered to be voluntary in nature with little or no business consideration. Therefore, donations are considered as an appropriation of profit and not a business expense.

Detailed explanation-4: -Cash donations are considered income when it comes to financial statements like your statement of cash flows.

Detailed explanation-5: -But all the Donations are not eligible for Expenditure, The income-tax law does not allow as expenses all the deductions. So, in order to claim Donations as expenditure The expenditure must be incidental to the business and must be necessitated or justified by the “commercial expediency”.