Tax Savings and Charity Donations: Things to Keep in Mind

There are various ways to save money on the income tax. One of these is donating money to charity organizations.

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The Section 80C of the Income Tax Act allows a taxpayer to enjoy tax benefits on the portion of the income they have donated to an eligible charity organization, granted it’s recognized by the government.

What’s the process?

You can provide donations to the charity organization in the form of cash, cheque, or even demand drafts(DDs). However, to claim the benefit of tax deduction you can only pay as much as Rs. 10,000 in cash. If you want to donate more than that, then the excess amount has to be paid either in the form of a cheque or a DD.

To claim the tax benefits, you have to mention the details of the donations in your income tax return. These include the amount donated, and the details of the charity organization viz. name, address, and PAN.

It’s extremely important that you conduct a background check on the organization you are donating the money to. You should also claim and keep the receipt of the donation for future references.

50% Exemption and 100% Exemption

When you donate a certain amount to a charity organization, then you may not get 100% tax exemption benefit. This is because all the charity organizations fall into two groups, one of these allows for 100% exemption, while others only 50%.

Some of the popular organizations that you can donate your money to claim 100% tax exemption include National Illness Assistance Fund, National Defence Fund, National Sports Fund, and Swacch Bharat Kosh.

Some of the popular organizations that offer 50% tax exemption benefit include Rajiv Gandhi Foundation, Indira Gandhi Memorial Trust, and Prime Minister’s Drought Relief Fund.

Donating a portion of your income to a charity group is a great way to save money on the income tax as well as do your bit for the society. However, be sure to do your research about the group you want to donate to before making any decision.