It’s the time of year when everyone is doing their best to figure out how to take advantage of tax breaks, or as a layman would say, how to save taxes. People opt for one of several tax-saving options, such as claiming interest and principal components on their home loan, life insurance premiums, medical expenses, etc. What most people don’t realize is that one of the simplest options is to donate to charity, as it not only entitles you to a 100% tax deduction, but also helps you do your part. for a cause.

Donate and save taxes

Under the Income Tax Act, charities are eligible for income tax exemption under Section 11. Similarly, donors are entitled to tax benefits under Section 35AC, the Section 80G, Section 80GGA, etc.

35AC/80GGA: If your source of income is a business or profession and you are donating to an institution approved by the National Committee (Ministry of Finance) to carry out any eligible project or scheme, then you are entitled to claim a deduction of 100% of the amount of your donation under Section 35AC. Those valued with a source of income other than the Company can claim the deduction for this contribution under section 80 GGA.

80G: Under Section 80G, a 100% or 50% tax deduction can be claimed depending on the purpose and agency you are helping. If you donate to the Prime Minister’s National Relief Fund and other funds specifically listed in the IT Act, you are entitled to a 100% tax benefit.

Donations to other Non-Governmental Organizations that are registered with the Income Tax Department as eligible to collect donations with the benefit of section 80G, are eligible for a 50% deduction for tax purposes.

Charities use these provisions of the Income Tax Act to encourage donors.

What institutions are eligible?

Care must be taken as tax benefits can only be claimed by donation to certain institutions/non-governmental organizations. It is the prerogative of the Central Government to approve the specific program of charitable institutions for the benefit provided for in article 35AC/80GGA.

How do tax-deductible donations work?

Suppose your taxable income for that tax year is Rs 200,000 and you donate Rs 5,000 to a charitable scheme approved under section 35AC, then your net taxable income will be reduced to Rs 195,000 and your tax will be calculated on this amount. The institution you have helped will issue you a certificate for your contribution, which you can then use to claim exemption from taxable income. Simply put, the exemption works by reducing the amount donated from your taxable wages.

In the end, considering that non-profit organizations are playing an important role in generating social and economic change in the country, it is important that they get support from all sectors. This is where you come into the picture. You can reach out and contribute. Your support will help reach more beneficiaries and bring about much-needed change in society.