Steps to Making Charitable Donations

Monday 7 November 2016

There’s a difference between a charitable donation and a random act of kindness like giving a beggar some money. For one, a money handout to the poor only encourages them to continue begging. Instead, if you desire that they find a life of health, happiness and purpose, you must donate to a charitable institution committed to these ideals. For this, you must identify an organisation involved in real charitable work, and then ensure that your donation generates value. And, as a small reward for your kindness, you can also enjoy a small tax rebate (via Section 80G of the Income Tax Act) for donations to charitable organisations.

Here is how you can donate effectively

1. Donate to a trusted NGO

Give your hard earned money to an NGO you trust, and also one that is eligible for donation tax return when you donate to charity. For this, the NGO must be formally registered (under Societies Registration Act 1860 or Section 25 of the Companies Act 1956). Here are some other aspects:

i. All sources of NGO income must not be exempted (including business income)

ii. NGO objectives must not spend on non-humanitarian causes

iii. No discrimination in spending on religious communities or caste

iv. Transparent accounts

2. Receipt and 80G exemption

Your Income Tax Returns are based on income source and total earnings, and you are legally permitted to restructure your wealth to be taxed less. Indian residents, Non-Resident Indians, a Hindu Undivided Family, and companies are eligible for rebate via charitable donations to institutions eligible to provide exemption under Section 80G.

You will need paperwork to acknowledge your donations to an NGO that provides you tax exemption while filing your Income Tax Returns. Here is the other documentation you will need:

 i. Stamped receipt that contains the citing name, address and PAN of trust/organisation. The receipt will also need your name and the amount donated.

ii . Form 58 for organisations that provide 100% deduction while filing ITR

iii. Registration number and validity dates

iv. 80-G certificate

3. Claim deduction

You will need to inform your office Accounts department during tax filing season about your intention to claim a tax rebate for donations made to a charitable organisation. All Indian employers are legally obliged to include tax exemption for an 80G-permitted list of charities, trusts and organisations. You will not find space for this investment in Form 16, but it is to be claimed separately. It works at par with other tax saving financial instruments by reducing your total tax liability.

Why you must donate to Save the Children

Save The Children is known for transparency in showcasing donation spending. The NGO spends heavily on its many programs to fight child exploitation across India.

Over 43,000 donors contribute to the NGO's fundraising programs and therefore are united in defending child rights. They donate both in dedicated cause based programs, and also through monthly commitments to allow the NGO to continue child rights work.

Conclusion

When you donate to an NGO, it is advisable to forget about the tax benefits, but rather the 'karma', or personal goodwill, as well as satisfaction for giving back to the society. The small end-of-year tax rebate is therefore just a small gift to acknowledge your philanthropic donations. You should be more interested in how your donation reaches India’s poor and needy children, who face challenges in every stage of their lives. Every rupee counts when working towards a noble cause, and for today’s salaried professionals a few hundred rupees are the equivalent of their month’s coffee budget. Your money will go towards providing a child with nutrition, care, education and most importantly, hope.