As individuals, we often need to contribute to social causes and uplift the underprivileged in our society. Donating to Non-Governmental Organizations (NGOs) like Narayan Seva Sansthan is an effective way to have a positive impact. However, beyond the satisfaction of helping others, there’s an added incentive in the form of tax benefits under Section 80G. How to Donate under Section 80G? The Income Tax Act 1961 allows donors to claim tax deductions on the donations made to eligible NGOs. This means that you are making a difference and can reduce your taxable income and effectively lower your tax liability. Let’s go into the specifics of Section 80G and the tax advantages it provides:
Understanding Section 80G
- Section 80G is a crucial provision in the Income Tax Act that aims to promote philanthropy and charitable giving among taxpayers. It incentivises individuals to support NGOs and other charitable institutions engaged in social welfare activities. By offering tax benefits under Section 80G on donations, the government encourages people to participate actively in charitable endeavours and contribute to society’s betterment.
- Monetary Donations: Monetary gifts include cash, check or internet transfer contributions. Donors can deduct their contributions to qualifying Organizations under this category. However, there are precise rules regarding the form of payment that must be followed to be eligible for a tax deduction.
- Contributions in Kind: Donating clothing, food, literature, or other valuable items may qualify for tax breaks. Nevertheless, the deduction is often restricted to the item’s cost or fair market value. For example, if a donor provides a set of educational books worth Rs. 5,000 to a qualified Charity, he or she can claim a Rs. 5,000 deduction under Section 80G. The deduction cannot exceed the item’s actual cost, even if the market value is higher.
Quantum Of Deduction
- How to donate under section 80G? The tax deduction allowed under Section 80G is 50% or 100% of the donated amount, depending on the NGO’s classification.
- Some NGOs are eligible for a 100% deduction, which means the entire donated amount can be claimed as a tax deduction.
- The deduction is limited to 50% of the donated amount for others.
Limitations On Deduction
- The Income Tax Act imposes certain restrictions on the amount of deduction allowed.
- Donations under section 80G made in cash exceeding Rs. 2,000 are not eligible for deductions. However, donations through digital modes like online transfers or cheques have no such restrictions.
- The total deduction claimed under Section 80G cannot exceed 10% of the donor’s gross total income.
Tax Benefits Under Section 80G For NGOs
- NGOs seeking tax benefits for their donors must obtain a valid 80G certificate from the Income Tax Department.
- To obtain this certificate, the tax authorities thoroughly scrutinise the NGO’s activities and accounts to ensure compliance with the necessary norms.
Importance Of Receipts
- To claim deductions under Section 80G, it is crucial to obtain a receipt from the NGO as proof of the donation.
- The receipt should contain details like the donor’s name, address, PAN number, amount donated, and the NGO’s registration number under Section 80G.
Online Donations And Documentation
- With the increasing popularity of online donations, claiming tax deductions has become more streamlined.
- Keep a digital copy of the transaction receipt, acknowledgement email, or any other relevant documentation when donating online.
Section 80G not only incentivises individuals to contribute to charitable causes but also empowers NGOs and charitable institutions like Narayan Seva Sansthan by encouraging more donations, and the main question is how to get tax benefits on donations. By leveraging this tax benefit, you can play an active role in positively impacting society while reducing your tax liability. However, ensuring that the NGO you donate to has a valid 80G certificate is essential to claim the deduction successfully. Always remember the joy of giving extends beyond monetary benefits, and your contribution can truly make a difference in the lives of those in need.