Donate And Save Tax

Giving is another way of saving tax

Many people have lost their livelihoods during this pandemic and it is our moral responsibility to monetarily help those in need.

Donations made to help people can help you save income tax as well.

Under Section 80G of the Income Tax Act, the Government provides some tax deduction on the donations given. A deduction of 50% or 100% of the amount contributed can be availed as a deduction.

Let us understand how Section 80G of the Income-tax Act can help you save taxes.

Who can avail the deduction?

Any taxpayer, individual or non-individual, who makes an eligible donation can avail the tax deduction subject to the limits and conditions of the Income Tax Act. This can be availed by only those opting for the old tax regime.

Mode of donation

The donation must be made in monetary terms. Donation up to INR 2,000 can be made in cash, but any amount above that must be made through cheque, bank transfer, etc.

Limit of donation

A deduction of 50% or 100% of the amount contributed can be availed as a deduction. Donations to certain organisations may also be restricted to an upper threshold for claiming tax deductions, depending upon the gross total income of the taxpayer.

For example, donations to Prime Minister or Chief Minister Relief Fund or PM Cares Fund are eligible for 100% deduction without any limit.

However, donation to any notified charitable trusts and institutions are eligible for 50% deduction subject to 10% of the gross total income of the taxpayer.

Documentary Evidence

The institution to whom the donation is being made must issue a receipt to the donor which acts as documentary proof for claiming the deduction. The receipt issued should have the details like name, address and PAN of the donor, besides the donation amount.

Ineligible Donations

Donations made to any political party or a foreign trust does not qualify for this deduction. Similarly, donations made to any institutions which do not have the 80G registration shall not qualify for this deduction.

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