How To Score Maximum Tax Deductions On Charitable Donations

We live in a money-minded world governed by a give and take policy. We expect returns for every penny we spend. We put money in a Fixed Deposit or invest in Mutual Funds to enjoy returns. In this mad rush of monetary give and take, we often tend to forget to contribute towards the well-being of the poor and needy.

Think that donating to charity will give you nothing in return except the wonderful feeling of satisfaction that comes from helping others? Well, that’s not entirely true as you can get tax benefits for the contributions you make to charity.

Considering the huge gap between charitable donations and the funds required to change the lives of the poor and needy, the Government of India came up with Section 80G in the Income Tax Act of 1961. According to the Section 80G, any individual, company or organization can avail tax benefits if they have contributed towards charity.

Let’s get a detailed view of how you can avail a tax deduction by donating towards charity:

Who can you donate to?

From NGOs to relief funds and charitable trusts, you can donate to any institution that works for a social cause. If you want to educate less privileged kids, you can donate to various children’s trusts. If you want to save stray animals or care for old people, you can contribute to animal welfare NGOs or old age homes respectively. Depending on the cause for which you wish to donate, you can make contributions to hundreds of charitable institutions.

But before you do so, make sure that those institutions are listed as non-profit organisations under Section 25 of Companies Act. There are quite a few fraudulent trusts out there so be careful to whom you donate your money. Do a bit of research on the non-profit organisation and its trustees before you give away your money to charity.

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While Section 80G allows tax deductions for donations made towards NGOs and charitable trusts, its sub sections also allow one to avail tax benefits:

Section 80GGA: Under this section, one can enjoy tax benefits by contributing towards organisations that facilitate scientific research and rural development. But according to this section, donors with business income are exempted from tax deductions.

Section 80GGC: Under this section, one can avail a tax deduction by making donations to a political party listed under Section 29A of the Representation of the People Act, 1951 or an electoral trust.

How to donate

It is to be duly noted that only monetary donations in the form of cash or cheque are accepted for tax deductions. If you contribute to a relief fund or an NGO by donating food, clothes, medicines, supplies etc., then the cost incurred will not be taken into account for a tax deduction. If you made a donation to a foreign charitable trust, then you can’t avail tax benefits. Also, if you pay for brochures, banners and pamphlets of a political party, it is exempted from tax deductions.

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Amount of tax deduction

While there is no limit towards donating to charity, tax deductions may or may not have limits depending upon the individual/company and the charitable organisation to which they have contributed. Donations to some institutions result in a 100% tax deduction on the donated amount, while donations to others lead to only a 50% deduction on the donated amount. In a few cases, depending on the charitable organisation that you are contributing to, the tax deduction is limited to 10% of the adjusted gross total income. So before donating, make sure you know how much of a tax deduction you can avail by contributing to a particular institution.

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How to claim a tax deduction

While filing Income Tax Returns, one needs to furnish the following details about the donation and the charitable organisation in order to avail tax benefits under Section 80G:

• Name of the non-profit organisation.
• Address of the non-profit organisation.
• Pan card of the non-profit organisation.
• Amount contributed.
• Stamped receipt of donation that contains registration number of the non-profit organisation.
• Form 58 of the non-profit organisation that holds details like the project cost for which the donation has been made, amount authorised and the amount collected so far.

List of institutions to which you can donate

As mentioned above, depending upon the charitable trust, one can avail a 100% deduction, 50% deduction and a deduction up to 10% of the adjusted gross total income of the institution.

Donation to organisations that let you avail 100% deduction without any limit

• National Defence Fund set up by the Central Government
• Prime Minister’s National Relief Fund
• National Foundation for Communal Harmony
• Any approved educational institution of national distinction such as IITs, IIMS, NITs etc.
• Zila Saksharta Samiti constituted in any district, chaired by the district collector.
• Any state government fund for medical relief to the poor
• National Illness Assistance Fund
• National Blood Transfusion Council or any State Blood Transfusion Council
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
• National Sports Fund
• National Cultural Fund
• Fund for Technology Development and Application
• National Children’s Fund
• Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any state or union territory
• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
• The Maharashtra Chief Minister’s Relief Fund
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• State Government of Gujarat fund exclusively for providing relief to the victims of earthquake in Gujarat
• Prime Minister’s Armenia Earthquake Relief Fund
• Africa (Public Contributions – India) Fund
• Swachh Bharat Kosh (applicable from FY 2014-15)
• Clean Ganga Fund (applicable from FY 2014-15)
• National Fund for Control of Drug Abuse (applicable from FY 2015-16)

Organisations to avail 50% deduction without any limit

• Jawaharlal Nehru Memorial Fund
• Prime Minister’s Drought Relief Fund
• Indira Gandhi Memorial Trust
• Rajiv Gandhi Foundation

Organisations to avail 100% deduction up to 10% of adjusted gross total income

• Government program or any approved institution for the purpose of promoting family planning.
• Donation by a Company to the Indian Olympic Association or to any other approved association established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India.

Organisations to avail 50% deduction up to 10% of adjusted gross total income

• Any other fund or any institution (NGO, charity trust) which satisfies conditions mentioned in Section 80G(5).
• Government program or any local authority for any charitable purpose other than the purpose of promoting family planning.
• Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both.
• Any corporation referred in Section 10(26BB) for promoting the interests of a minority community.
• For repairs or renovation of any notified temple, mosque, gurudwara, church or other places.

Now that you know all about tax deductions when it comes to donating to charity, be a good Samaritan by contributing towards a social cause and enjoy tax benefits in return!

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