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5 things you should know while donating to save tax

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May 08, 2015 10:36 IST

Don't end up claiming tax by just referring to Section 80G. There are some sub-sections also

True charity is the desire to be useful to others with no thought of any compensation. However, in the world of Karma, what goes around comes around. Therefore, all your acts of kindness in the form of charity and donations come back to you in the form of a tax benefit.

The government on its part allows tax deductions to encourage more and more people to donate to worthy causes. So, all philanthropic donations one makes towards any charitable cause to various trusts and approved charitable institutions are exempt from tax under Section 80G of the Income Tax Act.

If you are planning to donate for Nepal earthquake relief or any other good cause, here are five things you should know.

How to claim

Any donation made to various trusts and approved charitable institutions qualify for deduction under Section 80G of the Income Tax Act. In order to avail the tax deduction, you must furnish a stamped receipt issued by the recipient trust as a proof of the payment. Ensure that you mention the registration no. of the trust as per their 80G certificate. If the 80G certificate of the trust or organisation is valid till October 2009 only, they can still be donated to, as with effect from 1st October 2009 it is not required for trusts to apply for 80G renewal.

All donations are not eligible for 100% deduction

In some cases, full 100 per cent deduction is allowed on the donated amount. But in some others, only 50 per cent of the amount is eligible for deduction. Tax deductions on donations usually come with no upper limit, but in some cases there is a cap of a maximum of 10 per cent of the gross total income. In this case, if the aggregate of the sums donated amount happen to exceed 10 per cent of the adjusted gross total income, the excess amount is not entitled for tax benefit.

Sub Sections of Section 80G

Don’t end up claiming tax by just referring to Section 80G. There are some sub-sections:

Section 80GGA: Under Section 80GGA any donation made to entities in scientific research or rural development are applicable for 100% tax deduction, provided it is donated by tax payers with no business income.

Section 80GGC: Section 80GGC allows for 100 per cent tax deduction towards contribution to a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951) or an electoral trust.

There are some conditions while making donations

If you are planning to donate for a cause with a hope of claiming tax deduction, keep these points in mind. Only those donations made in cash or cheque are eligible for tax deduction. Which means, if you are offering a helping hand by any other means like clothes, medicine, utensils, food, etc, you are not eligible to claim for the expenses incurred for the same. Donations made to foreign charitable trusts are not eligible for any tax deduction. Donations made for political parties against their miscellaneous expenses like brochures, souvenirs or pamphlets cannot be claimed.

Beware of frauds

It is always possible for donated funds or relief money to be misused by unscrupulous elements. Never let your good intentions be taken advantage of by fraudsters. Double check the credibility of the organization and the background of the trustees before you make any donations.

Despite the contributions made by many philanthropists and social change activists for social causes, there is still a huge gap between demand and need. As the Government too is promoting it in a big way, this is your chance to save tax while getting that elusive halo on your head.

Donations eligible for 100% deduction

  • Prime Minister’s National Relief Fund
  • National Defence Fund
  • Prime Minister’s Armenia Earthquake Relief Fund
  • The Africa (Public Contribution - India) Fund
  • The National Foundation for Communal Harmony
  • Approved university or educational institution of national eminence
  • The Chief Minister’s Earthquake Relief Fund, Maharashtra
  • Donations made to Zila Saksharta Samitis
  • The National Blood Transfusion Council or a State Blood Transfusion Council
  • The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
  • National Illness Assistance Fund
  • Chief Minister's or Lt. Governor's Relief Fund
  • National Sports Fund
  • National Cultural Fund
  • Central Govt.'s Fund for Technology Development & Application
  • National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
  • Andhra Pradesh Chief Minister's Cyclone Relied Fund

Donations Eligible for 50% Deduction

  • Jawaharlal Nehru Memorial Fund
  • Prime Minister’s Drought Relief Fund
  • National Children’s Fund
  • Indira Gandhi Memorial Trust
  • Rajiv Gandhi Foundation

Donations the come with a maximum limit of Adjusted Gross Total Income

  • Donations to govt./ local authority for charitable purposes (excluding family planning)
  • Indian Olympic Association/ other such notified association

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