Things to Know About Tax Deductions on Donations

To promote the concept of charity and philanthropy, the Indian government has been constantly encouraging people to donate to the poor and needy. While this donation can bring a smile to other’s face, it can also help you save up on tax. The amount donated can be claimed as a deduction under Section 80G while filing the income tax return. Here is all you need to know about making a donation to NGO under 80G

What is Tax Exemption?

Tax exemption is the financial exclusion that reduces the donator’s taxable income. When you make donations to charitable institutions and relief funds, a certain amount would be deducted from your gross income. Thus, the amount remaining after the deduction on the donation will be your final taxable income.

Eligibility for Tax Deductions

It is important to note that not all donations are eligible under this section. Contributions made to certain charitable institutions set under the Income Tax Act, 1961 would only help you avail of tax deductions, except for the cases where the donation has been done in kind (food, clothes, or medicine). So, it is important to check if your donation qualifies for a tax deduction or not. You should request the NGO for Form 58 which comprises details like the total project cost, the authorized amount, and also the funds collected by the institution so far. Your tax claim stands rejected without this form.

Mode of Payment

In order to claim the deduction, you should ensure that you make the contribution through a Cheque or a draft or in cash. However, it should be noted that deduction cannot be claimed for donations made in cash exceeding an amount of ₹10,000.

Also, the donator is required to provide proof of payment to claim the deduction. This would include a stamped receipt issued by the recipient. Thus, to claim the deduction, the taxpayer would have to attach the proof while filing Income Tax Return. It should be ensured that all the details like full name, address, and PAN number of the NGO is clearly mentioned along with the taxpayer’s name and the amount received as a donation. One should also consult an expert if they wish to claim a deduction under Section 80G.

It is important to pick a reputed and genuine NGO that works for a number of causes. This will help you select the cause that is close to your heart and ensure that your money is put to good use. We hope that with this information, you will be able to make your next donation and claim a tax deduction without any hassle.