scorecardresearchIncome Tax: Donating to charity? Here's how much tax you can save under

Income Tax: Donating to charity? Here's how much tax you can save under section 80G

Updated: 27 Jan 2023, 07:58 AM IST
TL;DR.

The Income Tax Department allows scope for deductions not only on income earned but also on the donations made. Taxpayers participating in philanthropic activities can avail of tax deductions subject to certain conditions.

Income tax deductions on the donations made.

Income tax deductions on the donations made.

Charity need not always come at a cost. In fact, some donations can help you save some money from your income. For example, under Section 80G of the Income Tax Act, 1961, you can avail of tax benefits on donations made to various organizations. 

However, income taxpayers must stick to filing their income tax returns (ITRs) under the old tax regime to avail of the benefits under this section. Apart, the benefit under this section is available to both individuals and non-individuals who are eligible to donate from a part of their income under the given set of conditions stipulated in the Act.

Taxpayers must also check if they are eligible to avail of deductions on donations made under Section 80G of the Act. These include individuals, companies or Hindu Undivided Families (HUFs) though NRIs can also avail of benefits under this section subject to the condition that they dole out donations to eligible institutions. 

Donations are made in cash or kind, though to avail of tax benefits, interested taxpayers must donate in cash. This they can do by donating up to 2000 in cash while any amount donated beyond this limit must be done through cheque, bank transfer, etc.

Taxpayers often inquire how much of the money donated can be availed of as a deduction on the income calculated for tax purposes. The amount donated to certain organizations may be subject to a maximum deduction amount depending on the gross total income mentioned in the taxpayer’s ITR. For example, money donated to the Prime Minister's National Relief Fund (PMNRF) is eligible for complete deduction sans any limit. 

Taxpayers donating to local authorities or the government that promotes family planning activities are eligible to claim 100 per cent deductions on the amount donated. The donations made to the Indian Olympic Association are also eligible for complete deductions under this category. However, the amount donated must not exceed 10 per cent of the donor’s adjusted gross total income. Donations made over and above this amount are limited to 10 per cent for tax deductions. 

However, the 100 per cent deduction limit does not apply to donations made to religious places or places of worship including temples, gurudwaras, mosques, churches or any other. Section 80G of the Act specifically mentions that donations, made towards repairs or renovation, to places of worship are eligible for a 50 per cent deduction subject to 10 per cent of the gross total income of the taxpayer. Before donating money to trusts, taxpayers must ensure that the same are valid and registered under the Indian Trusts Act. 

The Income Tax Department assigns a registration number to each eligible trust, and donors should ensure that this number appears on their receipts. This registration number must be valid on the date of the donation, or else the donation may not be eligible for deductions.

However, anyone and everyone cannot claim the deduction on the donations made unless the receiving organizations issue a receipt to the donor. This receipt acts as documentary proof for donors to claim the deduction. Apart, the receipt must contain essential details including the donor’s name, address, PAN card details, and the amount of donation made. Taxpayers must make sure not to include the details of the amount donated to any political party or a foreign trust while assessing their income tax liability.

Donors intending to claim a complete deduction on the amount donated must fill and submit Form 58 without which their donations would not be eligible for a 100 per cent deduction. 

Taking part in philanthropic activities that benefit society as a whole. Tax deductions on donations encourage many to help interested organizations and societies with the necessary financial help. 

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First Published: 27 Jan 2023, 07:58 AM IST