Get 100% Tax Exemption By Donation

Tuesday 21 June 2016

Under Section 80G of the Income Tax Act, 1961, donors can receive tax rebates for donations to charitable organisations. The tax rebate can be claimed while filing the annual Income Tax Return. This is an immediate gratification to donors, as well as a benefit given by the government to recognised charitable organisations. However, not all philanthropic donations, no matter how virtuously made, earn the donor a reward in the form of a tax rebate.  Here are a few details you need to know about the tax rebate, as well as the provision for 100% tax rebate for the amount donated.

1. What is 100% tax exemption in donation deduction in income tax?

Assuming you donate a sum of 2000 rupees to a reputed NGO or charitable organisation which offers 100% tax exemption, your taxable income becomes total amount minus donated amount. Your net income is now revised, and your income tax will now be calculated on this amount, based on prevailing tax rates.

However, certain donations (under section 80G of the Income Tax Act) only give you 50% deduction on the donation made, while sections 80GGA or 35AC provide a deduction for the entire amount donated. These deductions are available for sums up to 10% of your taxable income (that is, your gross total income, minus deductions, minus capital gains, minus income exempt from tax, minus section 10 deductions).

2. Is there tax exemptions on cash donations as well?

A maximum of Rs. 10,000 limit has been set for claiming a tax deduction for 35 AC or 80G certificates. You will receive a tax certificate within days of contribution.  It should be noted that only cheque, cash, or online donations are considered valid for tax exemption. In-kind contributions such as food material, clothes, medicines etc do not qualify for the deduction.

3. Do all employers allow the 100% tax exemption to be considered in Form 16?

All organisations across the country are legally permitted to offer 100% tax exemption in Form 16s. Donations and any other tax saving measures cannot be restricted by an Indian company. You just need to give an advance notice to your office accounts team as per tax season schedule about the details of investment and other income tax-related savings in advance. This will prevent any additional deduction, such as Tax Deducted at Source (TDS)

4. I am an NRI. Will I get 100% tax exemption on my donation?

The Indian government formally recognises the contributions of non-resident Indians, and citizens with Indian passport can receive 100% tax exemption under section 35 AC or 80 GGA of the Income Tax Act. An NRI simply needs to cite their Indian PAN Card Number when they donate online in the prescribed form to claim tax benefits.

5. Donations with 100% deduction without any qualifying limit

Here are ten important donation types that you need to know about, 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)

Conclusion

It must be noted that donations to political parties (for miscellaneous campaign expenses etc), foreign trusts, and organisations not registered with the Income Tax Department via u/s. 12A & U/s. 80G do not qualify for tax rebate. However, the technicalities of the Income Tax laws should not dissuade the charitable from making contributions, as every rupee and every selfless act counts when helping the poor and needy.Even if you cannot donate money, you can always volunteer a few precious minutes of your time, as every deed can make a difference. Stay updated with the latest provisions of tax exemption. Donating to a globally reputed child rights organizations like Save the Children lets you contribute directly to helping India's marginalised children and also save tax.