Donate to charities and NGOs for reducing tax outgo

Sunday 27 November 2016

Your annual income tax liability depends on your annual income, as well as how you restructure your wealth. This can be done through making investments that qualify you for tax return rebates. These financial investments can save you a hefty amount of money, and increase the amount of money you can claim as your returns.

In this regard, donating to charity is a unique form of investment, especially if it’s a children’s NGO. It also symbolizes your commitment to changing the lives of some of India’s most marginalised children.

By giving them access to safety, nutrition and education you contribute to the betterment of your country as children are the future of the country. You are, thus, investing in a better, healthier and happier India. And for this, you can also claim substantial tax rebates.

Who is eligible for a tax rebate for charitable donations?

Section 80G of the Income Tax Act, 1961 allows access to tax rebates for donations to NGO fundraising. Indian residents, Non-Resident Indians, a Hindu Undivided Family, and companies are all eligible for filing for a tax rebate.

What kind of transaction is eligible?

Any donation made to NGOs or charitable concerns may have benevolent intentions, and may help the recipients (including medicine, food, water and other resources). But only money is counted as a transaction eligible for 80G deduction. Donations can be made by cheque and in cash. Donations to political parties as well as trusts and organisations not registered with the Income Tax Department u/s. 12A & U/s. 80G do not qualify for tax rebate.

Subsections to Section 80G:

It is not only charities that qualify for 80G tax liability reduction.

i. Section 80GGA can avail you 100% tax deduction. This includes donations made to entities engaged in scientific research and rural development

ii. Section 80GGC can avail you 100% tax deduction for donations made towards a political party registered under Section 29A, Representation of the People Act, 1951, or an electoral trust.

 

How does an NGO qualify for tax liability?

i. Formal registration under the Societies Registration Act 1860, or under section 25 of the Companies Act 1956.

ii. All the NGO’s sources of income should be permitted.

ii. Income or assets must be used for only supporting charities or humanitarian causes.

Iii. NGO should not spend exclusively for a particular religious community or caste.

iv. A transparent and detailed record of accounts of receipts & expenditures must be maintained.

How should you donate?

The swiftest and safest way of donating is directly on the website of the NGO, you seek to support. You will be establishing an instant paper trail, in the form of email confirmations, a formal online receipt, as well as a mention on your credit card/net banking statement. And, your donations reach directly to the NGO.

Documentation needed to file for tax deduction

i. A Stamped receipt from the NGO/trust/organisation, mentioning their name, address and PAN, as well as your name and amount donated.

ii . Form 58:Used inn case of claiming 100% deduction for charitable donations

iii. The organization’s Registration number with validity dates

iii. 80-G Certificate

Conclusion

Save the Children is a global leader in the field of child rights and has earned the support of large corporations, tens of thousands of individuals and many allied organisations. In India, the NGO spends heavily on programmes to fight child exploitation. Donation made to the NGO enable infrastructure and programmes for child rights initiatives. The NGO maintains transparent records and is proud to showcase the high volume of spendings towards programmes for empowering, educating and uplifting India’s downtrodden and marginalised children. Tens of thousands of individuals, as well as a network of India’s leading corporates, support the NGO in its noble endeavour.