Tax Benefits of Charity
Charity in simple terms is voluntarily giving any kind of help to those who are in need of it. This assistance that is offered to those who need it can be in monetary or non-monetary forms.
Charity is done for philanthropic or social reasons. It is always a good practice to share the privileges that the Creator has bestowed upon us with the underprivileged. According to the Indian Mythology by doing charitable deeds you make your way easy towards the door of heaven.
However, there is one thing that gets attached to the Charity that you do that is donations. Charitable Donation is referred to as gift or advance made in the form of land, cash, service or clothing and security towards a non-profit organization by an individual or a business firm.
While you donate keeping in heart a good cause there is a good chance for you to get certain deductions on your taxable income depending upon the institution you opt for making your donations. It is noteworthy that donations up to 10 percent of your total income would earn you deduction.
Tax Benefits of Charity in India–
Section 80G – All of you whether you are an individual, an NRI or a member of HUF and you are making donations that are eligible can earn a deduction up to 50 percent or 100 percent on your taxable income. However, the percent of deduction you get eligible for would depend upon the charitable institution which you are contributing to.
It is important for you to pay out your donation from exempted or taxable income. You should also remember that whatever donation you pay needs to be in cash or through cheque. Anything given in kind as a donation would not make you eligible for claiming deduction.
If you have made donations to political parties and foreign trusts keeping in mind that you will earn deduction then you are sadly mistaken. However, if you make donations in aid for development of games or sponsorship of sports that falls under u/s 10(23) or to Indian Olympic Association then your company qualifies for gaining a deduction on the taxable income.
- 100 percent Deduction on Donations – If you give your donations to any of the following funds you will earn 100 percent deduction without any qualifying limit on the donations you make. These funds are –
i. Approved university or educational institution of national eminence
ii. Donations made to Zila Saksharta Samitis.
iii. National Defence Fund
iv. The Chief Minister’s Earthquake Relief Fund, Maharashtra
v. Prime Minister’s National Relief Fund
vi. Prime Minister’s Armenia Earthquake Relief Fund
vii. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund
viii. The National Foundation for Communal Harmony
ix. The National Blood Transfusion Council or a State Blood Transfusion Council.
x. The Africa (Public Contribution - India) Fund
- 50 percent Deduction on Donations- The following funds are those that will provide you with 50 percent of deductions on the donations you make without any qualifying limit. These are:
i. Indira Gandhi Memorial Trust
ii. Prime Minister’s Drought Relief Fund
iii. The Rajiv Gandhi Foundation
iv. Jawaharlal Nehru Memorial Fund
v. National Child’s Fund
- If you make donations for promoting family planning to a local authority or government or you donate towards the Indian Olympic Association then you would qualify for 100 percent deduction subject to 10 percent of adjusted gross total income.
- If the amount you donate to local authority or government is for any other purpose than family planning then you qualify for 50 percent deduction subject to 10 percent adjusted gross total income.
- While you make donations to NGOs you earn tax deductions. It happens so because these NGOs are government approved and they run for a social cause. The NGOs registered under section 12A or section 10(23) c) and meeting certain other conditions are also exempted from paying tax.
- Section 35AC – If you make contributions towards certain pre-approved projects that fall under this section; you can claim 100 percent deduction on the donations you make.
- Section 35CCB – This section caters to NGOs who are involved in working towards aforestration and conservation of natural resources. If you make any donation for this purpose you qualify for claming 100 percent deduction.
- While you donate for a social cause it is important for you to get the receipt of your donation in order to claim a tax deduction. The receipt should bear you name, the name of the trust, the amount donated and also the registration number of the trust as per Section 80G.
- If you are a salaried person and have contributed your bit towards the charitable fund from your salary and if the donation receipt bears the name of the company, even then you are subject to a deduction under Section 80G and are entitled to claim the same.
Prior making your donations make sure that the charitable institution you are contributing to is a registered one. As they say whatever goes around comes back, thus a small contribution made by you for a good cause not only shows your sharing spirit but can end you earning tax deduction thus lowering your taxable income.
You may also take a step forward to contribute your bit towards the society by giving away the surplus food, clothes, toys, books etc that are no more useful for you. Who knows you may become the reason for lighting up someone’s face. After all there is nothing more satisfying than spreading smiles.
Contributed By: Megha Sharma |
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Megha Sharma works as a guest lecturer in Delhi. She holds an MBA & Doctorate from the UPTU. With extensive knowledge and experience in various financial products, she also works as a consultant in banking & finance domains wherein she offers advice to her clients in managing personal finance. | |
- Dr. prince john:if a trust having 10/23 c (4) how much deduction will we have in our income or is that trust eligible for 100% tax free17-Mar-2013 01:23 PMReply
