How the donation for tax benefit works

It’s the time of year when everyone is doing their best to figure out how to take advantage of tax benefits or, as a layman would say, how to save taxes. People opt for one of several tax saving options, such as claiming interest and major components of their home loan, life insurance premiums, medical expenses, etc. What most people don’t realize is that one of the simplest options is to donate to charities, as it not only entitles you to a 100% tax deduction, but it also helps you contribute your bit. sand for a cause.

Donate and save taxes

According to the Income Tax Act, charities are eligible for exemption from income tax under Section 11. Similarly, donors are entitled to tax benefits under Section 35AC, Section 80G, the Section 80GGA, etc.

35AC / 80GGA: If your source of income is a business or profession and you are donating to an institution approved by the National Committee (Ministry of Finance) to carry out any eligible project or scheme, then you have the right to claim 100% of the deduction of the amount of your gift under Section 35AC. Assessors whose source of income is not commercial can claim a deduction for this contribution under section 80 GGA.

80G: Under Section 80G, a 100% or 50% tax deduction can be claimed depending on the purpose and the agency you are helping. If you are donating to the Prime Minister’s National Relief Fund and other funds specifically listed in the IT Act, you are entitled to a 100% tax benefit.

Donations to other non-governmental organizations that are registered with the Income Tax Department as eligible to collect donations with the benefit of section 80G, are eligible for a 50% deduction for tax purposes.

Charities use these provisions of the Income Tax Act to encourage donors.

What institutions are eligible?

Be careful, as tax benefits can only be claimed through donations to certain institutions / non-governmental organizations. It is the prerogative of the Central Government to approve the specific program of charities in benefit of section 35AC / 80GGA.

How do tax deductible donations work?

Suppose your taxable income for that financial year is Rs 2.00,000 and you make a donation of Rs 5,000 to a charity program approved under section 35 AC, then your net taxable income will be reduced to Rs 1.95,000 and your tax will be calculated about this amount. The institution you have helped will issue you a certificate for your contribution, which you can then use to claim exemption from taxable income. Simply put, the exemption works by reducing the donated amount of your taxable wages.

In the end, considering that non-profit organizations are playing an important role in bringing about social and economic change in the country, it is important that they receive support from all sectors. This is where you come into the picture. You can introduce yourself and contribute. Your support will help reach more beneficiaries and bring about much-needed change in society.