- Date : 23/10/2017
- Read: 3 mins
- Read in हिंदी: क्या आपको पता है कि धर्मार्थ होने से टैक्स बचता है?
Being charitable is not only an ideal way to give back to society and those in need, but can also help you save on taxes.
“What goes around comes back around”. Take for instance, an act of kindness and generosity; being charitable is a wonderful deed that can come back to you in the form of tax benefit. To encourage donating toward worthy causes, the government allows you to save taxes on the amount you donate to certain institutions and NGOs.
We all know that charity is a noble deed. But along with making a difference to someone else, it can also help you save on taxes.
Who can avail the tax benefit?
Any individual tax payer, company or entity can avail this deduction under Section 80G of the Income Tax Act. Remember, the institutions and relief funds you are donating to are notified by the income tax department.
Important note: This deduction can be claimed irrespective of your source of income—be it salary, investment or business income (i.e. all legal income). However, it is important that the recipient issues you a stamped receipt as proof of donation. The amount you donate is then cut from your taxable income.
Related: Difference between Tax Exemption, Tax Deduction and Tax Rebate [Infographic]
Deductions under section 80G and its subsections
In addition to Section 80G, you can claim benefits under Section 80GGA and Section 80GGC. You can claim tax benefits for any donations made towards scientific research or rural development too, as per Section 80GGA.
Similarly, Section 80GGC allows deductions on contributions made to political parties. However, these parties must be registered under the Representation of the People Act, 1951 .
Important conditions to bear in mind
- When you make a donation, remember that not all types of donations are eligible for tax deductions. For example, donations in kind such as food, medicines, and clothing do not come under section 80G.
- Only payments in money: cash, cheque, and draft are eligible for tax deductions .
- Ensure you inspect an organisation thoroughly before donating. There are many fraudulent entities masquerading as credible organisations to make money.
- Only donations made to prescribed institutions can qualify for deductions. For example, donations made out to foreign charitable institutions are not eligible for tax deductions.
Related: Non 80C items that help you save tax
Even amongst the donations that can avail you a tax deduction, the actual rate may vary as below:
For a full list of deductions: you can visit the http://80g.in/ website.
Related: Components of your salary and their tax benefits [Infographic]
Latest amendment
In the Union Budget 2017-18, the Finance Minister proposed to limit cash donations received by charitable trusts from Rs 10,000 to Rs 2,000 . The aim is to prevent misuse of this facility through fake donation receipts. It also plugs a loophole in the system that allows black money to be converted into white. The amendment will come into effect from 1 April 2018. However, there is no limit if the donation is made through cheque or digital payments.
To sum it up
There are many organisations trying to improve the lives of people in the country. However, for this good work to continue, donations are essential. Check out the different organisations and select a cause that is close to your heart. This is a not only a good way to save tax, but is also a wonderful way to make a difference in the lives of others.
Disclaimer- This article is intended for general information purposes only and should not be construed as investment or insurance or tax or legal advice. You should separately obtain independent advice when making decisions in these areas
“What goes around comes back around”. Take for instance, an act of kindness and generosity; being charitable is a wonderful deed that can come back to you in the form of tax benefit. To encourage donating toward worthy causes, the government allows you to save taxes on the amount you donate to certain institutions and NGOs.
We all know that charity is a noble deed. But along with making a difference to someone else, it can also help you save on taxes.
Who can avail the tax benefit?
Any individual tax payer, company or entity can avail this deduction under Section 80G of the Income Tax Act. Remember, the institutions and relief funds you are donating to are notified by the income tax department.
Important note: This deduction can be claimed irrespective of your source of income—be it salary, investment or business income (i.e. all legal income). However, it is important that the recipient issues you a stamped receipt as proof of donation. The amount you donate is then cut from your taxable income.
Related: Difference between Tax Exemption, Tax Deduction and Tax Rebate [Infographic]
Deductions under section 80G and its subsections
In addition to Section 80G, you can claim benefits under Section 80GGA and Section 80GGC. You can claim tax benefits for any donations made towards scientific research or rural development too, as per Section 80GGA.
Similarly, Section 80GGC allows deductions on contributions made to political parties. However, these parties must be registered under the Representation of the People Act, 1951 .
Important conditions to bear in mind
- When you make a donation, remember that not all types of donations are eligible for tax deductions. For example, donations in kind such as food, medicines, and clothing do not come under section 80G.
- Only payments in money: cash, cheque, and draft are eligible for tax deductions .
- Ensure you inspect an organisation thoroughly before donating. There are many fraudulent entities masquerading as credible organisations to make money.
- Only donations made to prescribed institutions can qualify for deductions. For example, donations made out to foreign charitable institutions are not eligible for tax deductions.
Related: Non 80C items that help you save tax
Even amongst the donations that can avail you a tax deduction, the actual rate may vary as below:
For a full list of deductions: you can visit the http://80g.in/ website.
Related: Components of your salary and their tax benefits [Infographic]
Latest amendment
In the Union Budget 2017-18, the Finance Minister proposed to limit cash donations received by charitable trusts from Rs 10,000 to Rs 2,000 . The aim is to prevent misuse of this facility through fake donation receipts. It also plugs a loophole in the system that allows black money to be converted into white. The amendment will come into effect from 1 April 2018. However, there is no limit if the donation is made through cheque or digital payments.
To sum it up
There are many organisations trying to improve the lives of people in the country. However, for this good work to continue, donations are essential. Check out the different organisations and select a cause that is close to your heart. This is a not only a good way to save tax, but is also a wonderful way to make a difference in the lives of others.
Disclaimer- This article is intended for general information purposes only and should not be construed as investment or insurance or tax or legal advice. You should separately obtain independent advice when making decisions in these areas
