I have been working as a tax consultant for the last 15 years and had different clients who were facing various issues regarding IT filings and tax deductions. Among these issues, refusal of eligible tax benefits by the IT department was common. Some of my clients have concerns regarding the rejection of claimed tax benefits for NGO donations, donations for schools, and other charities. In almost all cases, improper documents and not following the legal procedures are the reasons for the denial of tax deductions. So here, I would like to mention the requirements for claiming tax benefits while making charity donations.
- Donations should be made only to the organizations registered under the 80G of the IT act. Other donations are not eligible for tax benefits.
- Certificates of donations should be produced for availing of tax deductions. Receipt of donations should have the stamp of the organization. The proof must contain the name, address, and pan card number of the institution along with the donor’s name.
- Donations in kind are not eligible for tax deductions
- Contributions exceeding Rs. 2000 should be made in any mode of payment other than cash like cheque, demand draft, net banking, debit, or credit card.
- Form 58 should be requested while making donations to an NGO. This contains the details regarding the total project cost, grants, and the fund collected by the institution.
- There are 4 categories of tax deductions under 80G
- Category 1- 100% of the donated amount
- Category 2- 50% of the donated amount
- Category 3- 100% of the donated amount, but maximum up to 10% of adjusted gross total income
- Category 4- 50% of the donated amount, but maximum up to 10% of adjusted gross total income
Suitable categories should be selected for claiming the benefits.
Contributions to government relief funds such as PM National Relief Fund, National Children’s Fund, PM Drought Relief Fund, and many others are also eligible for tax benefits. Other than the donations, investments like insurance policies, fixed deposits, and loan interests can also be claimed for tax deductions. Consulting a tax advisor or any other tax expert is recommended to get the advantage of maximum tax benefits.
