Taxation Rules for Charity

Charity is giving something to someone who is in need. It is the act of giving without expecting anything in return. It can be in the form of goods, money, time and effort in volunteering.

In personal finance, however, charity does give you something back. You donate money for a charitable cause and you are rewarded in the form of tax deduction. Section 80G of the Income Tax Act allows deductions for donations made to specified charitable institutions and relief funds from gross total income. This results in benefits for you as the taxable income is reduced.

Here are some points to remember from an Income Tax perspective when you make donations -

1) Tax deduction can be availed by any assessee who makes a donation to the specified institutions and the relief funds set up by the government.

2) Cash donations up to  Rs 2,000 to charitable funds/institutions will only be eligible for deduction under Section 80G from financial year 2017-18. There is no maximum limit on the deduction amount if donation is made by cheque or other digital payment methods. Donation in kind such as food or clothes do not qualify for tax deduction.

There are some rules regarding the amount that can be claimed as deduction for tax purposes -

Entities Without Upper Limit	You can claim 50% or 100% of the donation amount.	Example Entities – National Defence Fund, Prime Minister's Relief Fund, Zila Saksharta, CM’s Earthquake Relief Fund, NGOs involved in afforestation and natural resource conservation, National Sports Fund etc.
Entities With Upper Limit	You can claim 50% or 100% of 10% of your Gross Adjusted Income. The percentage depends on the entity. Gross Adjusted Income = Gross Total Income – Exempted Income- Long-term capital                                          gains - Deductions under section 80C to 80U	Example Entities – Prime Minister's Drought Fund, Donation to Specified Religious Institutions such as temple, church, mosque or gurudwara.

3) You should submit a receipt from the institution with your name and company name to qualify for tax deduction. The receipt should also have details such as name, address, PAN details, registration details of institution to which the donation has been made. The receipt should be stamped.

4) Donations made to political parties and for scientific research are not considered under Section 80G. Section 80GGC offers tax deduction for donations to political parties and Section 80GGA for donation made for scientific research.