Income Tax: Are All Donations 100% Exempted From Tax? Know Key Things Before Claiming Deduction

• March 23, 2023
• CA Chandan Agarwal's Office

Income Tax Return: You need to check the exemption limit on your donation receipt and claim deduction accordingly while filing your return.

Donations are exempted from income tax in India to encourage philanthropy and charitable giving. The government of India provides tax incentives to individuals and companies who donate to charitable organisations and trusts that are registered under section 80G of the Income Tax Act.

The rationale behind this exemption is to promote charitable activities and encourage individuals and corporations to contribute towards the betterment of society. This incentive is intended to foster a culture of giving in India and incentivize people to donate to various social causes.

Are All Donations 100% Exempt From Income Tax?

No. It is important to note that not all donations are eligible for tax exemption. The Income Tax Act specifies certain conditions that must be met for donations to qualify for tax benefits.

For example, donations made in cash above a certain threshold are not eligible for tax exemption, and donations made to political parties are not eligible for tax benefits.

According to the information available on the official website of the IT department, not all donations qualify for 100% exemption from tax.

The categories for tax deduction, based on whom you donated to (charitable institution, fund set up by Government, scientific research, etc.) are as follows:

1. Donations entitled for 100% deduction without qualifying limit
2. Donations entitled for 50% deduction without qualifying limit
3. Donations entitled for 100% deduction subject to qualifying limit
4. Donations entitled for 50% deduction subject to qualifying limit

You need to check the exemption limit on your donation receipt and claim deduction accordingly while filing your return.

Section 80G Of Income Tax Act

Section 80G is a provision of the Income Tax Act, 1961 in India that allows taxpayers to claim a deduction for donations made to certain charitable institutions and funds. The purpose of this section is to encourage individuals and companies to make donations to registered charitable organisations and to provide tax benefits to them.

Donations made to certain specified entities, such as the Prime Minister’s National Relief Fund, the National Defence Fund, and the Swachh Bharat Kosh, are eligible for a 100% deduction.

Under Section 80G, donations made to specified entities such as charitable trusts, institutions, and funds are eligible for a deduction from the taxable income of the donor. The amount of deduction depends on the type of entity to which the donation is made and the percentage of the donation that is eligible for the deduction.

To claim the deduction under Section 80G, the taxpayer must obtain a receipt or certificate from the donee institution stating the name and address of the institution, the amount donated, and the registration number of the institution under Section 80G.

Source: https://www.news18.com/business/income-tax-are-all-donations-100-exempted-from-tax-know-key-things-before-claiming-deduction-7340107.html