Donation given & recovered from the employees

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 August 2013 Our Company gave donation to Chief minister relief fund of Rs. 150000/- & one day salary of the employees were recovered. By this way our company collected Rs. 120000/- from the employees. How should we disclose it in the books of accounts.Can we reduce our exp of salary and claim 100% deduction of Rs. 150000/- u/s 80G or not reduce the exp of salary and claim 30000/- u/s 80G. but in second option we have to give credit the employees for donation u/s 80G. Please help on this matter.

Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2013 Please reply urgent!

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2024 In the scenario described, where your company made a donation of Rs. 150,000 to the Chief Minister's Relief Fund and recovered Rs. 120,000 from employees for this purpose, there are two aspects to consider: how to account for the donation and how to treat the recovery from employees.

Here’s how you can handle this in your books of accounts and for tax purposes:

### Accounting Treatment:

1. **Donation to Chief Minister's Relief Fund (Rs. 150,000):**
- Debit: Donation Expense (or Corporate Social Responsibility (CSR) Expense, if applicable) - Rs. 150,000
- Credit: Bank or Cash - Rs. 150,000

2. **Recovery from Employees (Rs. 120,000):**
- Debit: Bank or Cash - Rs. 120,000
- Credit: Employees (as a payable or receivable, depending on whether the amount was collected or not yet collected from employees) - Rs. 120,000

### Tax Deduction under Section 80G:

Now, for the purpose of claiming deduction under Section 80G of the Income Tax Act, 1961, here are the options:

1. **Option 1: Claiming Full Deduction of Rs. 150,000:**
- If your company wants to claim the entire Rs. 150,000 as a deduction under Section 80G, you should not offset any part of the donation against the recovery from employees. In this case:
- You will claim a deduction of Rs. 150,000 under Section 80G.
- The recovery from employees (Rs. 120,000) should not affect the deduction claimed. The donation amount to be considered for deduction under Section 80G is the actual amount donated by the company, which is Rs. 150,000.

2. **Option 2: Adjusting Donation with Recovery (Claiming Rs. 30,000):**
- If you choose to offset the recovery from employees against the donation:
- Deduct Rs. 30,000 from the donation amount (Rs. 150,000 - Rs. 120,000).
- Claim a deduction of Rs. 30,000 under Section 80G.
- Provide credit to employees for the amount recovered from them (Rs. 120,000) for their claim under Section 80G.

### Practical Steps:

- **Recording in Books:** Record the donation and recovery entries as mentioned above.
- **Tax Filing:** When claiming deduction under Section 80G in your income tax return:
- Choose the option based on whether you want to claim the full Rs. 150,000 or reduce it by the recovery amount (Rs. 30,000).

### Considerations:

- **Employee Credit:** If you offset the recovery against the donation, ensure proper documentation and credit to employees so they can also claim deduction under Section 80G for their contribution.
- **Auditor's Review:** It's advisable to consult with your auditor or tax advisor to ensure compliance with accounting standards and tax regulations while making these entries and claims.

By following these steps, you can appropriately account for the donation and recovery, and effectively utilize the provisions under Section 80G for tax deduction purposes.

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