This holds absolutely true when you talk about donations. While you give away with a golden heart, you also save goodness to your account. And while you will be paying off a part of your money, you will be happy to know that not only it’s going to give you satisfaction, but let you a sigh of relief because Hey! You might get tax exemption!
You heard it absolutely right! To encourage more donations for the social causes like mid day meal scheme, donation for education, & donation for ngo food distribution etc and ensuring that taxes don’t turn the smile on your face while you do it, upside down, the government of India under the Section 80G, Chapter 6A of the Income Tax Act gives tax exemption on donations in certain certified NGOs.
Not every NGO
Donations in just any NGO will not provide you the benefit of the exemption. NGOs and institutions you donate in should be registered with the Income-tax department through 12A, with tax exemption status under section 80G, 80 GGA, 35 ac (i & ii), (i & iii) of the Income Tax Act of 1961.
Who Can Donate?
The person donating to an Indian NGO and claiming for the exemption on tax has to be a resident of India or a Non-Resident Indian holding an Indian Passport with a taxable income in India.
DEDUCTION RATES AND HOW DO YOU QUALIFY:
While making an NGO donation with registered NGOs, a certain amount is qualified for the tax deduction under Section 80G. The donation will qualify for deduction only up to the limit of 10% of the Gross Total Income – GTI. Within which again there are limits that some donations qualify for the deduction at the rate of 100% and some qualify at the rate of 50%.
As per the amendments to the Finance Act 2017, cash donations exceeding Rs 2000, unless by means other than cash, will not be eligible for the tax benefit. While donations for rural development are concerned, cash donations beyond Rs 10,000 will not be eligible under section 80CGA.
PROOF OF PAYMENTS AND DEDUCTION
While after the donation, proof of payment must be submitted to claim the deduction. We’re pushing towards a cash-free economy; it is advisable to make donations by a cheque or demand draft than by cash. Do note, that the current budget has restricted the tax benefit on cash donations to the limit of Rs 10,000 only.
Also, it is advisable to take note of the PAN card number of the institution you’re donating it to. It will be needed while filing the tax returns and will also go for record purposes.
Now that you know that making a donation won’t rip your pocket away with taxes, it’s time to do some good.