80G Donations, Gratuity & Leave Encashment: Deductions People Forget

80C and 80D get all the attention, but several other exemptions and deductions quietly save taxpayers real money every year — especially around donations, retirement payouts and provident fund withdrawals. Here’s what’s easy to miss.

Section 80G — donations

• Some funds (PM National Relief Fund, PM CARES, National Defence Fund) qualify for a 100% deduction with no upper limit.
• Most other approved charitable institutions qualify for 50%, and several categories are additionally capped at 10% of your adjusted gross total income.
• Cash donations above ₹2,000 are not eligible — pay digitally, and keep the receipt with the trust’s 80G registration number.

Gratuity exemption

• Fully tax-exempt for government employees, regardless of amount.
• For private-sector employees covered under the Payment of Gratuity Act, exempt up to ₹20 lakh (lifetime limit across employers), or a formula amount if lower.
• Employees not covered by the Act follow a different, generally less generous formula.

Leave encashment on retirement

For non-government employees, leave encashment received on retirement or resignation is exempt up to ₹25 lakh (raised from ₹3 lakh), or the amount worked out by a prescribed formula — whichever is lower.

PF withdrawal — when it’s taxable

Withdraw your Provident Fund after 5 years of continuous service and it’s entirely tax-free. Withdraw earlier and it becomes taxable, with TDS deducted (higher if you haven’t furnished your PAN) — except in specific cases like ill-health or the employer discontinuing business.

Planning a retirement payout, a big donation, or an early PF withdrawal? Model the tax impact in our Income Tax Calculator first, or have a CA structure the timing to maximise what you keep.