Income Tax News: Donating to charity causes not only assists those in need, but it can also generate tax breaks for the donor. It is important to note, however, that not all donations are completely tax-deductible. Here’s what you should know.
Tax Deductibility
Donations to qualifying charity organizations may be deducted from taxable income, lowering the donor’s tax responsibility. However, the magnitude of the tax deduction is dependent on numerous criteria, including the recipient organization and the nature of the donation.
- Donations are eligible for 100% deduction without a qualifying limit.
- Donations are eligible for 50% deduction without a qualifying limit.
- Donations are eligible for a 100% deduction, subject to the qualifying limit.
- Donations are entitled to a 50% deduction, subject to the qualifying limit.
Section 80G
This is the primary area for tax breaks on charity contributions. It allows for tax deductions on donations made to eligible institutions such as non-governmental organisations (NGOs), religious organisations (with specific restrictions), and educational institutions.
The deduction rate might range from 50% to 100% of the donation amount, depending on the institution. Cash donations of up to Rs. 2,000 are eligible for deduction under Section 80G.
Section 80GGA
This is a subsection of Section 80G that provides additional benefits. It allows for a 100% deduction for donations made to designated causes such as scientific research or rural development programs. This deduction is applicable to all assessees except those who file under the new tax regime (Section 115BAC).
80GGB and 80GGC
Sections 80GGB and 80GGC of the Income Tax Act of 1961 relate to deductions available for contributions given to political parties. Individuals and businesses can claim deductions for contributions given to political parties under these clauses.
There is no maximum limit to the amount of contribution that can be claimed as a deduction under Section 80GGB. Contributors can deduct 100% of their donations to political parties under Sections 80GGB and 80GGC. This means that the entire donation amount can be deducted from the donor’s taxable income, lowering their tax burden.
To be eligible for these deductions, the political party must have been registered under Section 29A of the Representation of the People Act, 1951. Donors must keep relevant paperwork, such as receipts or acknowledgments from the political party, as proof of the donation.
