Income Tax Benefits and Donations in India..!
By Mr. Vineet
Agarwal, KPMG
The Income - tax Act,
1961 has provisions wherein tax benefits are given on donations made by an
individual to certain funds or / charitable institutions.
Here is a look at the
provisions relating to donations, as you may be in the process of making one.
The donations made to
registered funds, institutions, charitable trusts, societies, etc,.. which are
recognised by the income tax department under Section 80G of the IT Act shall
be eligible for tax deduction.
The rate of deduction
shall be 50% or 100% depending upon the type of fund / institution to which the
donation is made. The broad-level classification is as under:
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* Donations eligible
for 100% deduction..!
1. Prime minister’s
national relief fund,
2. National defence fund.
* Donation eligible
for 50% deduction..!
1. Prime minister’s
drought relief fund,
2. National children’s fund,
3. Donation to charitable trusts
and
4. Societies notified by the tax department.
5. Organisations like
Child Relief & &You (CRY) and
6. Helpage are also covered under this
section.
In some cases, the
rate of deduction is restricted to 10% of the adjusted gross total income.
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Mr. Vineet Agarwal, KPMG |
Cash, Cheque,
Transfer?
With effect from
April 1, 2013, donations made in cash will be eligible for tax deduction only
upto Rs. 10,000.
In order to qualify
for a tax deduction, any donation above this limit should be by cheque, draft
or / online payment.
Claiming Through
Employer..!
Employers can
facilitate employee’s donation for some funds by deducting the amount through
payroll.
Employer will
generally consider the deduction for donation while computing TDS on salary.
Claiming in income
tax returns..
Employees whose
employer do not provide the benefit of claiming through payroll - or /
those who are self-employed - can
claim deduction at the time of filing the tax return.
It is mandatory to
quote some details of the donation in the tax return, like PAN of the
institution towards which donation is made, amount of donation and address of
the institution.
It is advisable to
keep the donation receipts in your income tax file as it can help in case of
any tax assessment at a later date.
Donation in kind not
eligible for tax benefits..!
People also donate
clothes, food, books & other things to NGOs that collect these things for
further distribution to people in need. It must be noted that donations in kind
are not eligible for tax deduction.
However, donations in
kind certainly help the victims & should be given whenever possible.
Lastly, October is
the month of festivities and giving to the poor forms an integral part of our
festivals & traditions. You can make a donation to charitable institutions.
Tax benefit are an added incentive to donate generously.
About the author..!
The author Mr. Vineet Agarwal is a
Partner with KPMG. The views are personal.
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