Paying tax is a mandatory duty for every citizen belonging to a certain income category. However, for the well-being of people and the society, the Government has also made some provisions wherein one can save tax or get exemption from paying taxes. Donating to charity is one of the many ways that can give relief to taxpayers.
You must have noticed that income tax is the most discussed topic towards the end of the financial year! Simply because, everyone looks for a way to get income tax exemption or reduce the taxable income. The tax we pay is used by the government to ensure overall development of the country and its people by maintaining defence and police forces, building infrastructure, providing healthcare, and the like. But even though paying taxes is a mandatory duty for every citizen who falls within a certain bracket of income group, the government has made provisions wherein taxpayers can get relief from paying taxes.
Individuals investing on house rent, children education allowance, housing loan, medical insurance, donations to charitable organisations, and the like, can avail tax benefits. Focussing on charitable donations, this is the one of the most noble way of saving tax. The government has made this provision so that more and more people get involved with charitable causes that in turn helps to uplift the society and also helps in nation building. The Section 80G of the Income Tax Act states that if a taxpayer donates towards a charity, he or she will be eligible to receive tax relief. As a donor, you can either get 100% or 50% exemption on the donated amount based upon the type of charitable organisation you donate to. The percentage of exemption is pre-decided based on the criterions of the Income Tax Act.
However, to get this exemption, the tax payer has to ensure the following:
i. The NGO or charitable trust must be registered as a non-profit organisation under the Indian Trusts Act;
ii. The organisation must be eligible to receive donations and should be registered under the Income Tax Act, and under Foreign Contribution Act if it accepts foreign donations;
iii. It should communicate clearly whether it is eligible to give 50% exemption or 100% exemption on the donated amount;
iv. The charitable trust must provide a receipt of the amount you have donated; and
v. It should provide you a tax exemption certificate
If any of the above criterion is not met by an organisation, then your contribution may not be considered for tax relief.
As an example: when you contribute online donation or offline donation to The Akshaya Patra Foundation, a mid-day meal NGO, you will be eligible for 50% tax exemption under Section 80G of the Income Tax Act. As soon as the Foundation receives your donation, it will send you a receipt of your donation and within 10 -15 working days it will also send your tax exemption certificate. In addition, the NGO is registered under Indian Trusts Act, Income Tax of India, and Foreign Contribution Act. To maintain transparency with the donors, Akshaya Patra also publishes audited financial reports at the end of each financial year in the form of Annual Report. Thus, when you support Akshaya Patra, you get income tax exemption and also support food and education of millions of children across the country.
This year, save tax in a noble way!
Disclaimer: Each of the above-mentioned tax exemption plans has its own terms and conditions. Hence, it is advised to understand the respective tax exemption clauses prior to making an investment or a claim.