Flooded with representations, the Central board of direct taxes (CBDT) on Thursday clarified that a donation made by employees through the employer to the PM CARES fund will also get 100 percent tax deduction by claiming the same in their Form-16.
CBDT-- the apex policy making body of the income tax legislation in India issued a clarification saying that since the tax department will not be able to issue tax deduction certificates to all, especially employees making contribution through employers, "will be admissible under Section 80G on the basis of the form 16/certificate issued by the Drawing & Disbursing Officer (DD0)/employer."
"In cases where donation is made to the fund by an employee through employer, the fund may not be able to issue separate certificate to every such employee in respect of the donation so made, as the contributions made to the fund are in the form of a consolidated payment," the department said in a clarification circular, issued on April 9 by the tax department.
"It is hereby, clarified that the deduction in respect of such donations, will be admissible under Section 80G on the basis of the Form 16/Certificate issued by the DDO/employer," it added.
"The clarification has been brought after assessing various representations which were received by the tax department from across the country. A lot of corporate houses, MSMEs are wanting to donate one day salary to the fund, which is streamlined through their employers. Thus, in view of this, the actual recipient of the deduction should be the employee. Tax department noting these representations, decided to issue the clarification," said a source familiar with the development.
The government recently had clarified that the donations made to PM-CARES Fund will be allowed to be eligible for 100 percent tax deduction under section 80 G of the Income tax act, instead of the earlier decision of allowing only 50 per cent tax deduction.
The tax department amended the provisions of the Income-tax Act to provide the same tax treatment to PM CARES Fund as available to Prime Minister National Relief Fund. Therefore, the donation made to the PM CARES Fund shall be eligible for 100 percent deduction under section 80G of the IT Act.
Tax experts lauded the timely clarification as the accounting year has come to a close and donations are applicable for deductions till 30th June, but the tax practitioners are soon going to get involved in the exercise of issuing Form 16 to employees for return filing.
Amit Maheshwari, Partner, AKM Global stated, “This is an important clarification as there was apprehension in the minds of several employees as to how they would get the benefit after contributing to this noble clause. This clarification has made the availing tax benefit simpler for them now. We hope this will lead to more donations to the PM Cares fund.”"This clarification by CBDT is very timely and will encourage all employees both in public and private sector to contribute to PM Cares Fund through their employer by forgoing salaries, if not more , then at least of one day," said Ved Jain, former president of ICAI.