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How To Give So You Get Back: Charities And Tax Exemptions

15/01/2016 8:02 AM IST | Updated 15/07/2016 8:25 AM IST
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Crawling Through Tax Fence Hole

The season to be jolly, warm, hospitable... and generous has just passed, has it not? Perhaps this year you can stretch it a bit longer by giving a helping hand and help to those in need. Charity and acts of kindness are, after all, also way of improving your karma -- what goes around, comes around. So your good deed in donating to a charity will not go without reaping you rich rewards, not only in metaphysical terms but also financially. In India, the Income Tax Act has certain provisions which offer tax benefits to donors in order to encourage more philanthropic donations. One such section is Section 80G, with its different sub-sections.

However, availing of tax benefits is subject to certain conditions. Here are a few pointers:

➢ In order to be able to claim tax benefits on your donations, you need to bear in mind which organisation or NGO you are donating to. The charitable organisation should be registered with the Income Tax Department and should regularly renew its registration. The recipient trust or NGO should issue you a valid stamped receipt as proof of payment for you to avail of tax exemptions.

The amount of tax benefit varies according to the charity... Some will present an opportunity for 100% tax exemption while others will only allow for 50% tax benefits.

➢ Donating to any charity will not automatically mean you are eligible for exemption on the amount donated. The amount of tax benefit varies according to the charity you are donating to. Some will present an opportunity for 100% tax exemption while others will only allow for 50% tax benefits. If you donate to a scientific research association or the Swachh Bharat Kosh then you will get a deduction of 100% of the amount donated, but if you donate to a charitable trust with an 80G certificate then you might be able to claim a deduction of only 50% of the amount donated.

➢ While there is no limit to the amount you can donate to charity, there is a clause which limits the tax deductions on donations that you make. If the aggregate amount donated in a year exceeds 10% of the adjusted gross total income, then the excess amount is not entitled for tax benefit.

➢ Only those donations made in cash or cheque are eligible for tax deduction. Hence, if one is making donations in kind like food, clothing, medicine etc, one cannot claim the value of the goods donated for tax exemption.

➢ Donations made to foreign charitable trusts are not eligible for any tax deduction.

➢ The Form 16 given to salaried individuals doesn't mention any deductions on donations made under Section 80G. Hence, salaried individuals in order to be able to claim tax benefits on donations need to claim the same while filing the tax return.

➢ While there is a provision for 100% tax deduction on contribution to a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951) or an electoral trust, under Section 80GGC these donations will not be exempt if they are towards the party's miscellaneous expenses like brochures, souvenirs or pamphlets.

Frauds are everywhere... Make sure that you check the credentials of the trustees, has a valid and renewed registration with the Income Tax Department...

➢ 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.

➢ Frauds are everywhere, waiting to take advantage of your good nature. Make sure that you check the credentials of the trustees, ensure the organisation is registered, has a valid and renewed registration with the Income Tax Department, is able to furnish a valid receipt before you give them your money and support.

There is no time like the present to do a good deed, so spread the Christmas cheer!

Illustrative list of donations eligible for 100% deduction

• Prime Minister's National Relief Fund

• National Defense 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

Illustrative list of 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

• Donation to a registered temple trust

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