Income tax Act encourages many good causes such as supporting a disabled dependent, donation to charities or donations made for public good. March is one month when people get far more altruistic (kindness and concern for others) than usual. The amount donated towards charity attracts deduction under section 80G of the Income Tax Act.Any person who makes an eligible donation is be entitled to get tax deductions subject to conditions.
Eligibility for tax deduction
The first point to note is that donations under section 80G are treated as a deduction from your gross total income. Donation to government or any approved local authority to be utilized for promoting family planning, National games, National Defence Fund of the central government, Prime Minister’s National Relief Fund are eligible for 100 per cent deduction. Donation to government or any approved local authority to be utilized for any charitable purpose other than promoting family planning, NGOs etc are are eligible for 50 per cent deduction.
Compulsory for all charitable trusts to register themselves
Each year, one can save thousands of rupees in income tax through income tax exemptions.There are thousands of trusts registered in India that claim to be engaged in charitable activities. The Government has made it compulsory for all charitable trusts to register themselves with the Income Tax Department. Only if the trust follows the registration, they will get the tax exemption certificate, which is popularly known as 80G certificate. Charitable organizations/associations such as Society, Trust, NGOs etc can apply to the Department of Income Tax for registration under the provision of 80G in a prescribed form.
Receipt is must for claiming deduction
For claiming deduction under Section 80G, a receipt issued by the recipient trust is a must.Generally, the Income Tax Department issues the registration for a limited period (of 2 years) only. Thereafter, the registration has to be renewed.The donor must ensure that the registration is valid on the date on which the donation is given. 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.The receipt must not only mention the Registration number but also the validity period of the registration.Donations in kind do not entitle for any tax benefits.Only donations in cash/cheque are eligible for the tax deduction. You can also ask for a photocopy of the 80G certificate issued to the trust / institution by the income tax department.
In case of certain funds or institutions, donations above 10% of your Adjusted Gross Total Income (GTI) are allowed for deduction only up to 10% of your adjusted GTI. The deduction would be capped at 10% of your adjusted GTI even if you make a donation larger than 10% of your adjusted GTI. For claiming deduction under section 80G, file the original donation receipt along with the return of income.
If you are interested in philanthropic activities or want to contribute to your favorite charity, you can contribute to your favorite charity and save tax on your contributions. Remember, the donation should be made only to specified institutions as there are thousands of trusts. Many of them are genuine but some are untrue or fraud. You can also ask for a photocopy of the 80G certificate issued to the trust / institution by the income tax department.