As per Section 80G of the Income Tax Act, people who make donations to charitable organisations can avail of donation tax rebate. However, while attempting to understand the various aspects of claiming this rebate, it must be kept in mind that not every donation to a charitable initiative (both cash or kind) are eligible. With substantial benefits for being charitable, the technicalities of donation must be understood, vis-à-vis tax benefits. Also, the merits of donation are much more significant than merely the measurable tax benefits. With its impact on society, donation should be made with no thought of future compensation.
Do all social initiatives quality for donation tax benefits?
Not all donations are eligible for tax benefits. For example, any donations to political parties (for miscellaneous campaign expenses etc), foreign trusts, and organisations not registered with the Income Tax Department via u/s. 12A & U/s. 80G are all non-eligible for tax rebate.
What is eligible for tax benefits?
Section 80-G of Income Tax Act covers only the amount donated. It can only be claimed while filing the ITR (Income Tax Return), irrespective of source of income. This deduction is relevant to:
i. Indian residents
ii. Non-Resident Indians
iii. Hindu Undivided Family
iv. A company.
Understanding Section 80G registration
As mentioned earlier, not all donations are eligible for donation tax rebate. Along with formal registration (Societies Registration Act 1860, a corresponding law), or under section 25 of the Companies Act 1956, here’s how an NGO is qualified for tax benefits of donating to charity:
i. The NGO must not have a non-exempted source of income, including business income.
ii. The NGO’s objectives or bylaws should not enable it to spend income or assets on expenses that do not support charities or humanitarian causes
iii. The NGO should not discriminate spending on a particular religious community or caste
iv. The NGO must maintain accounts of receipts and expenditures
Documentation to file for tax deduction
The following documentation will be needed to supplement your request for a tax deduction for a charitable donation that you’ve made:
i. Stamped Receipt: Mentioning the name, address and PAN of the trust, as well as your name, and the amount donated.
ii . Form 58: Relevant for 100% deduction for charitable donations. The Form 58 should also be attached
iii. The organisation’s Registration number: A valid registration number, with validity dates, must be mentioned on the receipt
iii. 80-G Certificate: Attach a copy of the 80-G Certificate to the receipt to complete your paperwork
What kind of donations are eligible for a tax rebate?
Only cash or cheque donations are eligible for tax deduction. Therefore, the Act excludes the scope of in-kind donations, like goods and services provided to the charitable organisation, even if it includes clothes, medicine, utensils, food, etc.
Sub sections to Section 80G, ITA:
Tax deductions don’t only qualify with reference to Section 80G. Relevant sub-sections include:
i. Section 80GGA – 100% tax deduction: Donations made to entities engaged in scientific research and rural development
ii. Section 80GGC: 100% tax deduction: Donations made towards a political party registered under Section 29A, Representation of the People Act, 1951, or an electoral trust.
After having decided to consider charity as an instrument of social change as well as a means of tax saving, it is important to identify the correct NGO to donate to. Donate to NGO Bal Raksha Bharat, the best NGO for transparency in donation spending, and has spent a substantial number of donations on programmes to fight child exploitation across India. The NGO is tens of thousands of donors who support its noble cause of defending child rights. These donations aren’t just one-off giveaways but regular commitments for the infrastructure and programming needed for sustained child rights work.