What is Donation Tax Exemption?

Donation Tax Exemption

After creating wealth for ourselves, a lot of us like to donate to charity and give back to society. The age-old saying – “Tyag Ke Saath Bhog Karo” or “Learn to give to the needy while consuming goods” is as applicable in the present times as it was centuries ago. 

The Indian government also recognises this and facilitates the transfer of funds to charitable organizations and NGOs that are registered with it. The government also gives tax sops to people who donate to charity.

The laws of tax are not as complex as we think they are, but they are definitely vast.  Many times we overlook certain tax rules, and one such rule is tax deduction under section 80G. While you might have heard of 80C and 80D, the section 80G is something that can be news to you. Here we will take a look at this other form of tax exemption, which is called section 80G. 

What is 80G tax exemption?

Section 80G is basically a donation tax exemption, which means that you can do some good work by donating money, and you will be able to save on tax at the same time. 

80G tax exemption

Under the Income Tax Act, you are allowed to make donations to charitable institutions, and relief funds, and this will be deducted from your gross income. This means that only after this deduction on the donation, the amount left will be your taxable income. 

It is however important to know that this trust donation tax exemption is only allowed for those entities that are notified for this purpose by the Income Tax Department. 

Then again, you must keep in mind that a 100 percent of this deduction can only be claimed if you’ve donated to a specified list. Section 80G can prove to be a great way to get deductions on your income tax returns, while doing some good for society.

It is also interesting to note that Section 80GGA permits deductions for donations given towards scientific research or rural development. In this case, 100 percent of the amount that is donated is considered eligible for deductions.

How do I know if my donation is tax-deductible?

How do I know if my donation is tax-deductible

There are certain rules when it comes to giving donations to charity, and expecting a tax deduction. If you are planning to donate to a charitable cause, and are thinking of getting an adjusted gross total income, then you must follow the rules that have been laid out regarding the same. 

First and foremost, that organisation must be registered with the Income Tax Department. It is important to remember that you will not be able to claim any deductions if you have donated to an entity that is not notified by the Income Tax Department. It is also prudent to ask the NGO for its registration number.  

Then again, only donations made to a specified list are eligible for a 100 percent deduction. Hence, donations to specified funds and institutions are eligible for tax deductions. You must consult your Chartered Accountant before making a donation if you want to claim a deduction under 80G.

How much tax is exempt from 80G?

The maximum limit on cash donations for deduction was INR 10,000, but that got reduced in the Union Budget 2017. This was done to stop tax filers from misusing this benefit. 

As of 2018-19, your contribution under section 80G should be made to a specified fund or institution, and you can avail a maximum of INR 2000, if you have made the donation in cash. 

On the other hand, any amount donated to specified funds and institutions via cheque, or digital payment mode, has no maximum limit on deductions available under section 80G.

Another important factor is that you can either claim tax benefit of 100 or 50 percent of the amount donated under section 80G. You can also avail this if you donate to a government or any local authority for charitable purposes. 

There are certain rules in this regard. However, if you have made a donation in clothes, food, etc, then this shall not be counted in tax exemption.

To calculate temple donation tax exemption, you must know that your donation is eligible for a 50% deduction, subject to 10% of adjusted gross total income if you donate for repair or renovation of any temple, mosque, gurudwara, church, etc that have been notified.

How much donation is tax-free in India?

tax free donation in India

As mentioned earlier, you can either claim 50 percent, or 100 percent of the amount you have donated, depending on the rules of the Income Tax Act. The amount that can be claimed as a deduction, with or without an upper limit completely depends on the type of entity you are donating the money to. 

So, according to the Income Tax Department, if the clause of without upper limit is applicable in your case then you can claim 50 or 100 percent of the amount, and that too without any sort of limitations. In order to avail this you can donate to the Prime Minister’s National Relief Fund, and as well as the National Defence Fund. Here 100 percent is applicable.  

On the other hand, if you donate to Jawaharlal Nehru Memorial Fund, and Prime Minister’s Drought Fund, then you are allowed to claim 50 percent of the donated amount. For the deductions with the upper limit clause, we are talking about 100 or 50 percent deduction, subject to 10% of adjusted gross total income. 

As mentioned earlier, repair and renovation of religious places fall into the bracket of 50 percent claim. On the other hand, if you donate to any government or local body for promoting family planning, you can claim 100 percent of the 10 percent of your gross total income. 

How much of a donation is tax deductible?

As per laws of donation exemption in income tax, your donation is tax-deductible only if you donate to Indian organisations, both local, and government bodies. The rule for a tax deduction as stated earlier is calculated as per 50 percent tax deductions or 100 percent tax deductions. 

As mentioned in the previous section, this completely depends on where you are donating, for what purpose, and also the form of payment. The income tax exemption for donation to charitable trust can be availed by anyone in the country. Anyone is eligible for deductions under the 80G of the income tax rule. 

Donations to ISKCON can be used for 80G deduction

The International Society of Krishna Consciousness is a cultural NGO that was founded in 1966. ISKCON has been spearheading charitable projects for the betterment of society. Three of its main charitable projects are International Society for Cow Protection; ISKCON Tribal Care Trust; and Food for Life Global

Devotees are welcome to donate to these charitable causes, and seek the tax deduction under trust donation tax exemption laws of the Income Tax department. Deductions available under the section are according to the rules of the Income Tax laws.