The recent floods in Kerala were devastating. It destroyed homes, displaced people and ripped apart livelihoods. The only silver lining to this dark cloud was the unending generosity of people who poured in money and gave their time to participate in relief efforts. The good news is that the Income Tax Department is always appreciative of generosity and allows donations to be deducted from your income under the section, 80G. However, this deduction is subject to conditions, so here’s a short guide on how it works.
What Kind Of Donations Are Eligible For Tax Deductions?
Donations made to specific relief funds and registered charitable institutions are eligible for deductions under section 80G. Donations can be made by bank transfers, cheques, DDs or cash, but cash donations in excess of Rs. 2,000/- are not eligible for deduction.
Donations made in kind are not eligible for tax deductions either. The e-commerce giant Amazon made it possible for people to buy supplies for those afflicted by the floods, for example, but that is not a transaction that is eligible for tax deductions.
When you do make a donation, make sure you get a receipt when you make the donation because you will require the name, PAN number and address of the organization you’re donating to, when you’re filing your returns.
What Is The Tax Deduction I Can Get On My Donation?
There are two types of deductions that you can get – one with a limit and one without a limit, depending on the institution that you made your donation to. Government owned and operated relief funds belong in the no-limit category. For example, if you had donated to the Kerala Chief Minister’s Relief Fund, you will be eligible for 100% deduction, that is, if you had donated Rs. 10,000, you can deduct the entire amount from your income on which tax is payable. There are a few other funds, like the Jawaharlal Nehru Memorial Fund and Prime Minister’s Drought Relief Fund for which donations are eligible for 50% deduction without any qualifying limit, but there don’t seem to be any funds in this bracket which are related to the floods in Kerala.
When you donate to an NGO or any other charitable institution, your donation is capped by a limit. You will be allowed 50% of your donation or 10% of your Gross Total Income, whichever is lower. So if you donated Rs. 10,000 to an organization and your gross total income is Rs. 10 lakh, you will be only be allowed to deduct Rs.5,000, which in the lower amount in this case compared to Rs. 1 lakh, which is the 10% of your gross total income. If you had donated Rs. 2.5 lakh, on the other hand, you’d have received a Rs. 1 lakh deduction (the lower of Rs. 1.25 lakh and Rs. 1 lakh). Every NGO that you donate to will fall under the 50% limit category.
Having said that, it is not possible for you to get a deduction if the NGO itself hasn’t complied with the conditions required by the Income Tax Department. You can check if the institution you’re donating to is indeed a tax exempt institution by running their name or PAN number in the Income Tax website. If their name isn’t there, your deduction won’t allowed. Many fraudulent agencies give their PAN number to make it seem like they are genuine, but merely having a PAN number isn’t enough for a deduction under Section 80G.
Finally, make sure you claim it when you’re filing your income tax return!
Donate and donate well
It is best to donate through direct means – in the case of the Kerala Floods, donating to the Chief Minister’s Relief Fund online or through the websites of NGOs ensures that you will get a receipt that you can claim tax on later. While tax deductions are a nice perk to generosity, it is important to not let it define the way in which you want to help people in need – whether it’s by spending time volunteering in relief camps or helping out pack supplies. No contribution is too small, and no donation is too insignificant.
Rupee Rani is a weekly column on finance for women. Write to us with your queries at rupeerani@thenewsminute.com