Every drop of water builds an ocean and every ounce of charity builds a nation. Your contribution, large or small, empowers the other and plays a vital role in wholesome development. And if the act of giving came with an incentive there’s little that must stop you and me from performing it.
But before we discuss the incentives, let’s briefly touch upon the three important steps you ought to follow to responsibly allocate your funds for charity. First, the decision to bequeath must be made early (in the beginning of the financial year in case of a regular yearly contribution or early stages of life in case of a large onetime donation). The process can be lengthy and at times, tedious. Second, the donation amount must be arrived at after a thorough assessment of your assets and liabilities and third, the funds you wish to set aside as charity must be parked in another bank account or a trust or a legal entity.
If you are a tax paying individual or a company you will be delighted to read further. Sections 80G of the Income Tax Act allows you to make donations to relief funds and charitable institutions as a tax deduction from gross total income. Although the list of is lengthy, not all donations are eligible for deduction under the section. Donations to 19 National Funds make you eligible for up 100% or 50% of claim whereas donations to entities in scientific research (Section 80GGA) and contributions to political parties (Section 80GGC) qualify you for 100% of the tax deduction. Donations to non-profit government organizations also allow 50% deduction but the qualifying amount is capped at 10% of your adjusted gross total income. Note of caution: Only those tax payers who have no business income can claim under Section 80GGC.
To claim these tax deductions the contribution must be made in cash, draft or cheque only. The receipt for the donation must be collected and should have your name, identity number, the name of the trust name, the registration number of the trust and donated amount. In order to curb tax payers from producing fake receipts, the Government of India lowered the maximum limit allowed for donation in cash from INR 10,000 to INR 2,000 starting financial year 2017-18. If the donation has been deducted from your salary account and the receipt has been issued in the name of your employer, you will need to submit a letter from your employer specifying that the donation was made and the amount was deducted from your salary account.
To sum up: arrive at the amount you wish to contribute, pick a registered charitable institution, submit the donation receipt, reap benefits of the qualifying tax exemptions and repeat cycle as there’s nothing more fulfilling than sharing smiles and spreading harmon(e)y.
Posted: March 2018