Tax Deductions for Donations
According to the Income Tax of 1961, donations towards charity attract tax exemption under Section 80G, subject to terms and conditions. Individuals, companies and other organizations can enjoy tax deductions. Donations for specified funds and organizations, in case the amount is more than 10% of the total gross income, are eligible for tax deductions.
There are several institutions and trusts that carry out charitable activities. There are also several others who, in the name of charity, horde up on money. In order to differentiate between authentic and fake charitable organizations, the Indian Government has made it a rule that all charitable trusts be registered with the Income Tax Department. There are two kinds of registration - Section 12A and Section 80G. If a trust registers itself under Section 12A, then it qualifies for tax exemption under Section 80G of the Income Tax Act, 1961. A list of approved institutions, that includes corporate bodies, societies and trusts, having the 80G certificate is periodically released by the government. Here are some instances where the donor can avail tax benefits.
Institutions’ List for Availing Tax Deductions:
Though in most cases there is no limit to the amount donated, some cases only accept a maximum of 10% of the total gross income. Here is the break-up of tax deductions under Section 80G:
- 100% deduction that has no qualifying limit
- 50% deduction minus the qualifying limit
- 100% deduction subject to a specific qualifying limit
- 50% deduction subject to a predetermined qualifying limit
Mentioned below are some institutions where tax exemptions can be availed based on the parameters provided:
Donations to the list of institutions provided below are eligible for total or 100% tax deduction. There is no qualifying limit when it comes to donating to these institutions:
- Army Central Welfare Fund
- Air Force Central Welfare Fund
- Indian Naval Benevolent Fund
- Approved educational institution or university of national eminence
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- The Africa (Public Contribution – India) Fund
- Government/association/institution/local authority promoting family planning
- National or State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
- National Cultural Fund
- Prime Minister’s National Relief Fund
- Indian Olympic Association and any other notified associations
- Chief Minister’s or Lt. Governor’s Relief Fund
- Donations made to Zila Saksharta Samitis
- National Foundation for Communal Harmony
- Andhra Pradesh Chief Minister’s Cyclone Relief Fund
- National Sports Fund
- Prime Minister’s Armenia Earthquake Relief Fund
- National Illness Assistance Fund
- Central Govt.’s Fund for Technology Development & Application
Donating to the the below institutions’ list attracts 50% tax deductions. There is no qualifying amount to be donated towards these organizations:
Donations to the local authority or government for charitable purposes. This does not include family planning.
- Indira Gandhi Memorial Trust
- World Vision India
- Jawaharlal Nehru Memorial Fund
- National Children’s Fund
- Any authority or corporation with income exemption under Section 10(26BB)
- Prime Minister’s Drought Relief Fund
- Udavum Karangal
- The Rajiv Gandhi Foundation
- Donations for renovation or repair of religious places
100% Deductions on 10% of Adjusted Total Gross Income:
Donations made towards these funds will attract 100% tax deductions subject to 10% of the gross total income of the donor:
- Amount paid by an organization towards Indian Olympic Association
- Money donated to the local authority or the government in lieu of family planning promotions.
50% Deductions in lieu of 10% of Total Gross Income:
Money donated towards charitable activities initiated by the local authority or government attract 50% tax deductions subject to 10% of the gross total income. The activities, however, do not include family planning promotions. Tax for the qualifying amount, which is calculated as 10% of the adjusted gross total income, is deductible under Section 80G of the Income Tax Act, 1961. The gross income is divided into the following parameters:
- Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D of the IT Act relating to foreign companies and non-resident Indians
- Exempted income
- Amount that is eligible for deductions under Sections 80CCC to 80U (excluding Section 80G)
- Long-term capital gains
Claiming Tax Exemption: Required Documents:
The trust or charitable institution need not apply for 80G certificate renewal from October 1, 2009. The same certificate remains valid from the aforementioned date till thereafter, unless or otherwise specified by the department to apply for a renewal. The donor should present the following documents in order to avail tax benefit:
- In order to claim deduction, a stamped receipt issued by the trust is mandatory. The receipt should have details such as the name, address and PAN of the trust, along with the donor’s name and amount donated (written in figures and words). If the donation is eligible for 100% exemption, Form 58 should be availed from the Trust. Details such as cost of the project, actual amount, and amount authorized for the said project are covered in Form 58. The 100% tax deduction claim will be void in the absence of the Form 58.
- Mention of Registration No. of the Trust Under 80G on receipt:- The most important requirement is the Registration number issued by the Income Tax Department under Section 80G. This number must be printed on the receipt. Generally, the Income Tax Department issues the registration for a limited period (of 2 years) only. Thereafter, the registration has to be renewed. The receipt must not only mention the Registration number but also the validity period of the registration.
- The trust’s registration’s validity is essential, since tax benefits cannot be availed in case the trust has failed to apply for a renewal. Hence donor must always ensure that the registration is valid on the donation’s date.
Type of Donation Amount:
- Donations done in cash or cheques are eligible for tax exemptions. However, food packets, clothes, blankets, etc. donated during natural calamities or man-made disasters do not have any tax benefits. Tax deduction can only be availed if the donation amount is above Rs 10,000 and is paid via cheque or in cash.
- NRI can also make donations that will be exempted from tax, towards specified funds or institutions.
- Deduction from tax for charity donations, can be availed by the employee if the amount is deducted from the salary and the receipt is under the employer’s name. A certificate from the employer quoting that the contribution was made from the employee’s salary account can also help in availing tax exemption under Section 80G.
These were some areas where a donor can apply for and avail tax benefits. Before applying for tax deductions, it is essential to have all the documents in place, along with the 80G certificate’s photocopy.