Income Tax Benefits & Donations..!

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.

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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