Your income tax is an important deduction for the Indian government to invest in infrastructure, utilities, and aid at times of need. At the same time, the government has enabled Indian citizens to reduce the total tax burden through legally accepted means. No matter how far the income tax season is, you must begin on better tax planning as soon as possible, to best use these facilities. The Income Tax Act (1961) offers tax benefits of donating to charity to anyone who makes donations to charitable organisations under Section 80 (G). Here is what you must know about donations to save tax.
1. Types of donations
A Rs. 10,000 limit is established as a limit for claiming a tax deduction for 35 AC or 80G certificates. You will receive a tax certificate that will accompany your income tax application form. Only cheque, cash, or online donations are accepted for tax exemption. Food, medicine, clothing etc. might be a valid contribution, but are not applicable for tax purposes.
2. Donations with 100% deduction
Ten important types of donation which permit 100% deduction:
1. National Defence Fund set up by the Central Government
2. Prime Minister’s National Relief Fund
3. Fund set up by a State Government for the medical relief of the poor
4. National Illness Assistance Fund
5. National Blood Transfusion Council or to any State Blood Transfusion Council
6. National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
7. National Sports Fund, National Cultural Fund, and National Children’s Fund
8. Fund for Technology Development and Application
9. Swachh Bharat Kosh (applicable from FY 2014-15)
10. Clean Ganga Fund (applicable from FY 2014-15)
3. Donate online
A one-time donation, or periodic donations to a social cause can be easily made via app-based banking and instant online access within minutes. The funds are channelised towards large-scale projects of social transformation, making online funds the fastest way of giving back. Encrypted gateways and password authentication ensure safety, making online transactions secure and instant. Online statements and real-time records are maintained by banks and credit card providers, which serve as a virtual paper trail.
4. The value of a small donation
Every rupee matters as it goes towards well-researched programs that can generate long-term change across communities. NGOs like Save the Children have decades of experience in fundraising and generating value from financial donations to fight hunger, poverty, illiteracy and child exploitation. Tax exemption for donation to registered organisations and charities is available to Indian residents, Non-Resident Indians, Hindu Undivided Family, or companies.
5. How does an NGO qualify for tax exemption?
An NGO must fulfil certain criteria to receive tax-exempt donations. These include formally registration under the Societies Registration Act 1860 or under section 25 of the Companies Act 1956. The NGO must generate income through permissible means, and income and assets must be used for only supporting humanitarian causes. The NGO must not also discriminate in its spending for a particular religious community or caste. These transactions must be clearly recorded in its books of accounts transparently.
India is becoming more cognizant of the power of NGOs in making a difference to society. This is leading more kind-hearted citizens to invest more time in identifying organisations to contribute to. NGOs like Save the Children are known to stakeholders for established high standards of ethics, transparency, and ability. Save the Children brings tens of thousands of children out of poverty, ill health and exploitation every year. Contributors to the NGO receive a substantial donation tax rebate, and the satisfaction of knowing that they will generate the highest return on social investment.