One of the easiest approaches to save money and simultaneously assist others is by making a tax deductible donation. Many Indians are not completely aware that supporting particular charities or organizations can also lower their income tax. This blog will go over in plain terms how a tax deductible donation operates, who can claim it, and some things to consider.
Describe a Tax Deductible Donation
When you make a tax deductible donation—that is, when you donate money to particular approved organizations—you can lower that amount from your overall income when you file income tax. This reduces your tax burden. You might be able to write off ₹50,000 from your income, for instance, if you pay ₹5,00,000 to an approved trust. You will thus pay taxes on ₹4,50,000 rather than ₹5,00,000.
By Whom Can One Claim This?
Anyone claiming a tax deductible donation from income tax filed in India will. You might be a freelancer, a business owner, or a salaried employee. If companies donate under specific guidelines, even they can claim deductions. Still, it’s crucial to retain the correct donation receipt and paperwork. The donation should go to a company registered under Section 80G of the Income Tax Act.
Kind of Donations Are Acceptable?
Not every donation results in tax savings. Only those assigned to companies registered under 80G are qualified. Among the few instances are:
- PM CARES Money
- CRY, or Child Rights and You
- Foundation for Akshaya Patra
- Government aid money
One should make the donation using cheque, bank transfer, or digital payment. Tax deductions for cash gifts above ₹2,000 are not allowed.
The Claim Amount: How Much?
The organization you donate to will determine the tax deductible donation amount you can claim. While some let 50% deduction with restrictions, others let 100% deduction without any restrictions. For instance, donations to the National Relief Fund of the Prime Minister are 100% deductible.
Only up to 10% of your whole income are donations to many NGOs 50% deductible.
If you are donating for tax savings, particularly, it is always advisable to find out the deduction limit.
Notable Things to Remember
- Ask always for a donation receipt. Its PAN and 80G registration number should be those of the company.
- To claim in the current financial year, donate before March 31.
- Save a copy of the UPI confirmation or bank statement.
- If you wish to get tax benefits, do not donate cash more than ₹2,000.
Said another way, a tax deductible donation lets you save money and do good. Done properly, it helps the one in need as well as the donor. Therefore, next time you consider tax planning, think about supporting a cause dear to your heart. You will change things, and your pocket will thank you as well.
