Best Ways to Get Income Tax Exemption

Tuesday 29 March 2016

In the month of March every year, we often see salaried professionals frantically frisking through a stockpile of documents to sort out their tax. The Government of India has provided certain legal and legitimate means through which eligible individuals can save income tax. There are several financial instruments to avail tax exemption. These include insurance, mutual funds, government savings schemes, etc. However, there is one way through which you can not just save tax, you can also contribute your significant bit in the upliftment of the society and that is donating to organizations working for social causes.

Donation and Tax Benefits go Hand in Hand
The ideas of charity and philanthropy have existed since time immemorial. People across the world donate for worthy causes with an aim to improve the lives of those with lesser means. From companies to individuals, people from all walks of life are known to contribute money for a better future for all. When you donate to eligible NGOs working for charitable causes, your donation becomes entitled for tax exemption. For every donation, tax returns are provided by the government. The Income Tax Act, 1961 encourages charitable deeds and under Section 80G, it offers tax benefits to the donors. As per the provisions of this Act, when you donate money to eligible trusts, charitable institutions and approved educational institutions, the donated amount qualifies for deduction under Section 80G.

Eligibility of NGOs under Section 80G of the Income Tax Act
This section of the Income Tax Act applies to donations to any institution or a fund which is setup in India for charitable purposes and meets certain requirements such as:

  1. The institution or fund maintains separate books of account in respect of such business.

  2. The funds collected by the institution are utilized only for charitable purposes and for meeting the cost of running the organization.

  3. The work done by the institution or the fund is not intended to benefit a particular caste of community.

  4. The institution or fund maintains regular accounts of its receipts and expenditure.

It must be kept in mind that only financial contributions are eligible for tax exemption under section 80G. Any material contribution does not qualify for any form of tax relief.
Documents required for claiming Tax deductions
For claiming tax exemption through donation to charities, you must have the required documentation in place. Here’s what you need:

  1. Stamped Receipt: A donation receipt which carries the name, address and PAN of the trust, your name and the donation amount.

  2. Registration Number of the Trust:  It is vital that the receipt bears the registration number of the trust along with the dates of validity.

  3. Photocopy of 80-G Certificate: Make sure that you obtain the 80-G certificate from the organization to which you donate.

While charity is supposed to be a selfless act of giving, the income tax advantages given by the government are only meant to foster the practice of giving for a noble cause. When you go ahead and donate to help people in need, your kindness gets returned in the form of tax benefits. Therefore, if you’re a supporter of charitable causes, it’s important for you to stay updated with the latest provisions of tax exemption for donation and adhere to all the rules. When you donate to trusted child rights organizations like Save the Children, you contribute to the welfare of the most marginalized children and also save tax. You are making a positive impact in the life of a child with limited means and at the same time saving money. Remember, a small act of giving can save a life. Don’t hesitate in helping poor. Donate now and make a difference.