A child in a remote village finally gets to attend school because someone like you decided to help. An elderly person receives medical care thanks to another stranger’s kindness. One single donation may seem small, but combined donations can change lives. But here is something many people do not know: When you donate to registered NGOs in India, you can also reduce your income tax. This makes making donations easier, at the same time extremely beneficial. This blog discusses in detail everything about the donation tax deduction – 880 and how donating can actually lower the taxable income.
Understanding the Tax Benefit
In India, the government encourages charitable donations by offering tax deductions under Section 80G of the Income Tax Act. This means that if you donate to eligible NGOs or funds you are eligible for NGO donation tax exemption, a portion of your donation can be deducted from your taxable income, reducing the amount of tax you owe.
Real-Life Example
Let’s say you earn ₹5,00,000 annually. You decide to donate ₹10,000 to a registered NGO. Depending on the NGO’s eligibility, you could claim a deduction of ₹5,000 (50%) or even ₹10,000 (100%) from your taxable income. This means you’ll be taxed on ₹4,90,000 or ₹4,95,000 instead of the full ₹5,00,000, leading to tax savings(charity donation tax deduction).
How Much Can You Deduct?
The deduction you can claim depends on the NGO or fund you donate to:
100% Deduction Without Limit: Donations to trusted and registered NGOs like Saravanan Foundation qualify for a full deduction with no upper limit.
50% Deduction Without Limit: Some funds allow a 50% deduction without any cap.
100% or 50% Deduction with 10% Limit: For many NGOs, the deduction is either 100% or 50% but capped at 10% of your adjusted gross total income.
Documentation You Need
Stamped Receipt: Issued by the NGO, showing:
- Donee’s name, address, PAN, and registration number
- Donor’s name
- Donation date and amount
80G Certificate: A copy issued by the institution.
Proof of Payment: Bank statement or cleared cheque/draft copy, especially for donations over ₹2,000 in cash
Important Points to Remember
- Payment Method: Donations above ₹2,000 must be made through cheque, demand draft, or electronic transfer. Cash donations exceeding ₹2,000 are not eligible for tax deductions.
- Eligible Organizations: Ensure the NGO is registered under Section 80G. You can ask the NGO for their registration details or check on the Income Tax Department’s website.
- Documentation: Obtain a receipt from the NGO with details like their name, address, PAN, registration number, your name, and the donation amount. This receipt is essential when claiming the deduction. Saravanan Foundation, a registered NGO in Bangalore, provides you with a slip immediately after the donation.
Who Qualifies?
All taxpayers—individuals, Hindu Undivided Families (HUFs), firms, companies, and NRIs—can claim donation to NGO tax exemption under Section 80G, regardless of their income source. Whether you’re a salaried professional, a freelancer, or running your own business, your altruistic contribution can benefit both society and your wallet.
How to Claim the Deduction
When filing your Income Tax Return (ITR):
- Search for deductions under Chapter VI-A.
- Enter the details of your donation, including the NGO’s name, PAN, address, and the amount donated.
- Specify the category of deduction (50% or 100%, with or without limit).
- Retain the donation receipt and any other relevant documents if the tax department requests them later.
Final Thoughts
Donating to NGOs is a noble act that brings positive change to society. The added benefit of tax deductions under Section 80G makes it even more rewarding. By giving thoughtfully and keeping the necessary documentation, you not only support causes close to your heart but also enjoy financial benefits.
So, the next time you consider making a donation, remember your generosity can light up someone’s life and lighten your tax burden.
