Donations in India stem from a desire to help others and contribute to social good, with the added advantage of potential tax savings through Section 80G. Donations address a wide range of needs, from long-standing social issues to immediate crises. Many people donate to support causes they care about, such as poverty alleviation, education, healthcare, or environmental protection. Some donate to political parties as well.
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Donations are also a part of many religious practices in India. People donate to temples, mosques, gurudwaras, and other religious institutions as a way of expressing their faith and supporting their religious community.
Donations Tax Exemption In India
The tax deduction under the Income Tax Act allows taxpayers to reduce their taxable income by a portion of their donation amount, thereby lowering their tax liability. This acts as an incentive for people to donate. The tax exemption encourages charitable giving, which benefits society as a whole. At the same time, it allows donors to save on their taxes.
While some donations are eligible for full tax exemption under certain conditions, others may only be partially exempt or not exempt at all.
Are all donations 100% exempted from tax?
No, not all donations qualify for 100% exemption from tax. The categories for a tax deduction, based on whom you donated to (charitable institution, fund set up by government, scientific research, etc.) are as follows:
- Donations entitled for 100% deduction without a qualifying limit
- Donations entitled for 50% deduction without a qualifying limit
- Donations entitled for 100% deduction subject to the qualifying limit
- Donations entitled for 50% deduction subject to the qualifying limit
You need to check the exemption limit on your donation receipt and claim deduction accordingly while filing your return.
Sections 80G, 80GGA, 80GGB, and 80GGC of the Income Tax Act all deal with tax deductions for donations made, but with some key distinctions:
Section 80G:
This is the main section for tax deductions on charitable donations.
It allows for deductions on donations made to various qualified institutions like NGOs, religious organisations (with certain restrictions), and educational institutions.
The deduction percentage can be 50% or 100% of the donation amount, depending on the type of institution.
Cash donations up to Rs. 2,000 qualify for deduction under Section 80G.
Section 80GGA:
This is a subsection of Section 80G that offers additional benefits.
It provides a 100% deduction for donations made towards specific causes like scientific research or rural development initiatives.
This deduction is available to all assessees except those filing under the new tax regime (Section 115BAC).
Section 80GGB & 80GGC: (Tax exemption for donation to political party)
These are both subsections related to political donations.
- Section 80GGB: This allows companies to claim a 100% deduction for donations made to registered political parties.
- Section 80GGC: This allows individuals to claim a 100% deduction for donations made to registered political parties.
Important points for 80GGB & 80GGC:
- Donations cannot be made in cash. Only digital transfers are accepted.
- This deduction is only available if you file taxes under the old regime (not the new Section 115BAC).
- The total deduction cannot exceed your taxable income.
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