Though social well-being and supporting people in need aren’t initiatives we make in lure to earn tax benefits,the finance minister has decided to throw the bait of tax benefits to woo funds for cleaning the country, river Ganga and curb drug abuse.
Though these are the recent additions to the funds that can help you get tax deductions, other causes and organisations too exist to which one can donate and also save tax.
But before we claim the dual benefit of doing your bit for the country and claim tax deduction, let us understand the nuances of this benefit provided under the section 80G, 80GGA and 35AC.
The amount donated to some funds, charitable institutions all come under 80 G, while money gifted for the purpose of scientific research or development and rural well-being are governed by 80 GGA.
If you donate Rs 5000 to any organization, stop before you write the entire sum, while claiming the benefit in your tax returns. Not all donations are exempt 100%.
Claim 100% tax exemption …
When you donate money to a scientific research association including approved university, college or other institution to be used for scientific research or rural development then you can claim 100% deduction under section 80GGA. The options include the National Urban Poverty Eradication Fund and the three recent additions of Swachh Bharat Kosh, Clean Ganga Fund and National Fund for Control of Drug Abuse would be deductible upto 100%.
Remember that people who earn income or profits from business cannot claim a deduction under section 80GGA., Organizations having income from business or profession can get 100% deduction under section 35AC based on the donation to the relevant organization and fund. This amount donated is allowed as deduction from income from business profession.
Claim only 50% …
Donations made to various funds, non-governmental organizations and charitable trusts created and approved by the government qualify for only 50% deduction to be claimed. So, if the fund that you invest in has an 80 G certificate you can claim only 50% of the amount donated.
These funds include the National Defence Fund, Jawaharlal Nehru Memorial Fund, Prime Minister’s Drought Relief Fund, Prime Minister’s National Relief Fund, National Children’s Fund, Indira Gandhi Memorial Trust, Rajiv Gandhi Foundation, and National Foundation for Communal Harmony etc. There are many funds which are created by the state or central government based on the natural calamity striking various parts of the country. These are approved by the government and included in the list of institutions by donating to which you can claim tax deductions.
Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund the National Illness Assistance Fund, Fund for Technology Development, National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities, National Sports Fund are other funds that qualify for 50% deduction under section 80 G.
Donation to political parties
In April 2010 another deduction was permitted under Section 80GGC. Any amount contributed to a recognized political party can be claimed as a deduction under Section 80GGC. The donation can also be made to an electoral trust that works to conduct elections. Interestingly, unlike other deductions there is no ceiling on the amount that can be claimed as a deduction.
The deduction is available only if the donation went into party coffers. Cash given to individuals wouldn’t qualify.
Assessing deductible percentage
In case you opt for the organization under 80 GGA you get a tax benefit on 100% of the amount donated and if the institution is created under section 80 G then you will get benefit on 50% of the donation amount.
However, there are NGOs which can offer both benefits 80 G or 80 GGA and you will have to opt for the cause accordingly. For instance, all donations to HelpAge India are tax exempted under sections 35AC and 80GGA of Income Tax, while CRY has options where money donated can be utilized as per under section 80G to get a deduction on 50% of your donation and also under section 80GGA and 35AC depending on the project it is implemented under.
But just because a 100% exemption is available doesn’t mean you can donate the entire amount and pay no taxes. To avoid misuse, the quantum of deduction is limited to 10% of the gross total income of the donor. This limit is applicable on the entire donation done by you in the financial year and not per instance.
Also, only monetary donations can be considered for deduction. Offering your service to an organization can’t be quantified and claimed. Similarly, food, clothes, utensils and medicines donated too wouldn’t be accepted for tax deduction. The ground rule while claiming tax benefits on donations is that one should be able to trace the path of money to the beneficiary fund or organisation and hence donations via cheque or DD should be opted for over cash.
The receipt in form 58A should be preserved, as proof of details, are now asked in the income tax return forms. Ensure that the institutions name, address, registration number, PAN, your name and the amount are mentioned on the receipt. The expiry date of the registration too needs to be checked on the receipt, especially for claiming 100% benefit under section 35AC (by businessmen and professionals).
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