International Day of Charity – Tax Deductions on Donations and Charity

Have you ever felt the urge to make a difference, to leave a positive mark on the world? The International Day of Charity, observed on September 5th, is a global call to action, inspiring individuals, organisations, and communities to engage in acts of kindness and compassion. It’s a day to honour Mother Teresa’s legacy, whose tireless work for the marginalised continues to inspire millions.

Beyond emotional satisfaction, charitable services also offer the benefit of tax deductions. In India, the Income Tax Act offers a powerful incentive to claim deductions for contributions to certain approved charitable entities.

Your Donation, Your Impact

Section 80G and 80GGA of the Income Tax Act allow individuals, companies, firms, Hindu Undivided Families (HUFs), Non-Resident Indians (NRIs), and other entities to claim deductions on their donations.

How Section 80G Works

Not all donations are treated equally when it comes to charitable giving. The Indian Income Tax Act offers significant tax benefits through Section 80G, but these benefits are subject to certain conditions. Understanding these conditions is crucial for maximising your deductions and making the most of your charitable efforts.

Donations with a 100% Deduction Without Limits

Donations made to funds like the National Defence Fund, the Prime Minister’s National Relief Fund, or the National Children’s Fund enjoy a full 100% tax deduction. There are no restrictions or qualifying limits for these donations.

Donations with a 50% Deduction Without Limits

Similar to the first category, donations to trusts like the Prime Minister’s Drought Relief Fund or the Indira Gandhi Memorial Fund qualify for a 50% tax deduction. There are no restrictions on the amount you can donate.

Donations with a 100% Deduction with a 10% Cap

Donations to local authorities for family planning or to the Indian Olympic Association can also qualify for a 100% deduction. However, this deduction is limited to 10% of your adjusted gross total income. Any excess amount is rounded off to the nearest 10%.

Donations with a 50% Deduction with a 10% Cap

Donations to local authorities or the government for general charitable purposes are eligible for a 50% deduction. Similar to the previous category, this deduction is capped at 10% of your adjusted gross total income.

Additional Deduction: Section 80GGA

Apart from Section 80G, there is also Section 80GGA, which provides deductions for donations made towards scientific research and rural development. This section is available to all individuals except those with income from business or profession. It’s a great way to support impactful projects and receive a tax benefit in return.

Making a Claim

When making a claim for deductions under Section 80G and Section 80GGA, proper documentation of donations is essential. Contributions can be made via cheque, draft, or cash, but it’s important to note that for Section 80GGA, cash donations exceeding ₹2,000 do not qualify for deductions.

To successfully claim these deductions, specific details must be included in your income tax return. These details include the name, the PAN, the address, the amount contributed (with a clear breakdown of the contribution made in cash and through other modes), and the amount that is eligible for deduction. These details should be carefully entered into the appropriate tables provided in the ITR form to ensure a smooth and accurate claiming process.

Conclusion

This International Day of Charity reminds us that we have the power to make a difference, no matter how small our contribution may seem. By donating to worthy causes and taking advantage of tax deductions, we can amplify our impact and create a more compassionate and equitable society.