How to Claim a Tax Deduction for Donations

01/06/24

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Income tax deduction

Those looking to save tax this fiscal year will have definitely looked into the popular Section 80C of the Income Tax Act, to claim INR 1.50 lakh from total income. There is also a Section 80G offering tax-saving provisions for charity. Section 80G enables tax exemptions for everyone – Individuals, Hindu Undivided Families, Companies and Partnership Firms. It is also applicable to Non-Residential Indians, making it a highly attractive tax-saving option along with charity.

The government has offered deduction under Section 80G of the Income Tax Act as an incentive for Donation.

Under the Income Tax Act, in computing the total income of an assessee 50% of “Donation given to any institution or fund covered under sub-clause (iv) of clause (a) of sub-section (2) of Section 80G of Chapter VIA of Income Tax Act i.e. organisation like Bal Raksha Bharat subject to 10% of adjusted gross total income”, shall be deducted.

Adjusted gross total income means, gross total income as reduced by any portion thereof on which income-tax is not payable under any provision of Income Tax Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of Chapter VIA of Income Tax Act.

Mode of payment

Taxpayers can claim deduction under Section 80G if their donation is made through cheque, draft, cash or online. Deduction under Section 80G is available for cash donation* that does not exceed Rs.2,000. This therefore makes it imperative to use cheque or online donation to qualify as deduction, aligned to the government’s vision for cashless economy and transparency.

Deduction shall be allowed under Section 80G in respect of any donation unless such donation is of a sum of money.

** Please note that Bal Raksha Bharat  does not accept any donations in cash irrespective of any amount.

Procedure for an NGO to qualify for approval under Section 80G of Income Tax Act

For an NGO to qualify for approval under Section 80G of the Income Tax Act, it needs to fulfil certain criteria. It should be registered under the Societies Registration Act 1860 or under Section 25/8 of the Companies Act 1956/2013 or under Indian Trusts Act 1882 and it fulfils the conditions mentioned in sub-section (5) of Section 80G of Income Tax Act.  Bal Raksha Bharat is registered under Societies Registration Act and has fulfilled the conditions of sub-section (5) of Section 80G of Income Tax Act.

Documentation to claim the deduction under Section 80G

As per Clause (viii) and (ix) inserted in sub-section (5) of Section 80G w.e.f. 1.4.2021, requiring institution or fund approved under Section 80G to file a ‘Statement of donation received(in Form No.10BD) having details of donors and donations received’ and also to issue the ‘Certificate to the donor(in Form No.10BE) having details of the donee, details of donor and details of donation received during the financial year’, on or before 31st May immediately following the financial year in which the donation is received.

It has been further stated that deduction on account of the donation under Section 80G shall be allowed to the donor only on the basis of the Statement filed by the donee institution or fund.Bal Raksha Bharat shall issue the ‘Certificate(in Form No.10BE) under Section 80G to the Donor having details of the organisation, details of Donor and details of the donation received during the financial year and on the basis of ‘Statement of donation received(in Form No.10BD)’ filed by the Bal Raksha Bharat, details of the Donation will appear in the Income Tax Return of Donor to claim deduction under Section 80G.

Conclusion

Increasingly, Indians are becoming more socially-minded and willing to donate to NGO fundraising. International NGOs like Bal Raksha Bharat have set high benchmarks in ethics, transparency, and ability. It provides a substantial donation tax rebate to donors, as well as the satisfaction of having made a difference. It does this through its well-researched and executed programs that span cities, towns, and villages across India designed to bring children out of the circumstances of poverty, ill-health and exploitation through campaigns in nutrition, health care, relief and education.

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Soumi Halder

Manager-Program Campaign and Communication, Programme Support

“With over 20 years of dedicated experience in the social development sector, I am passionate about championing child rights and community empowerment through innovative communication strategies. I am Manager for Programme Campaigns and Communication with Bal Raksha Bharat (Save the Children)."