It’s the festive season, and people who want to improve their ‘good deeds’ account, would be looking to contribute to charity for the underprivileged people. It’s doing your bit for society and trying to make a difference.
It also comes with certain other benefits for you, namely tax deductions. Section 80G of the Income-tax Act, 1961 allows for tax deduction on donations made to a charitable organisation.
According to a report by consulting firm, McKinsey & Co, it’s a transformative moment for philanthropy in the post Covid-19 pandemic.
“The philanthropic response to the Covid-19 pandemic has shown the sector at its best. From the launch of community-based rapid-response funds to the development of diagnostics and vaccines, philanthropy is showing up both to flatten the curve in the short-term, and to address the inequities the crisis will exacerbate over the long-term, ” the report said.
In India, a number of individuals and corporations donate to charity for religious purposes, and to enjoy the benefits of tax deductions.
What Is Section 80G: You can claim a deduction under Section 80G of the Income-tax Act, 1961 for contributions made to certain relief funds and charitable institutions. All donations, however, are not eligible for deductions under Section 80G. Only donations made to certain prescribed organisations qualify for deduction. This deduction can be claimed by any taxpayer – individuals, companies, firms, or any other person. This deduction is not available if you are opting for the new tax regime.
Says Akhil Chandana, partner, Grant Thornton Bharat LLP, an accounting and advisory organization: “Section 80G of the Income-tax Act, 1961 provides deduction to taxpayers for donations made to the certain relief funds and charitable institutions approved by the income tax department for this purpose. The deduction can only be claimed when the donation is made through cheque, draft or cash (up to Rs 2,000). In-kind contributions, such as food, clothes, etc., do not qualify for deduction under Section 80G.”
Chandana adds: “In order to claim the deduction, the taxpayer must have the donation receipt which should include the name, address and PAN of the beneficiary, since the same is required to be reported in the tax return for availing the tax exemption.”
Charity can be made to various non-governmental organisations (NGOs), trusts or even political parties.
The Income-tax Act, 1961 provides tax reliefs to taxpayers depending on the registration available with the NGOs, trusts. Taxpayers can claim deduction for 100 per cent of donation amount if contributed to specified NGOs and/or trusts, provided the donation is not made in cash.
Says Anita Basrur, partner, Sudit K Parekh and Company LLP: “Donations towards the Prime Minister's National relief fund, Chief Minister’s/Lieutenant Governor’s relief fund, and certain other specified funds would be eligible for 100 per cent deduction. Donations to other approved charitable organisations would be eligible for 50 per cent deduction.”
