Donating to a non-governmental organization is one of the noblest ways to save tax

We are all aware of income tax and we are also aware that it is our fundamental duty to pay taxes on time every year. Taxes are applicable for all salaried and self-employed individuals earning above a certain income level. Additionally, businesses also need to declare their income and profit based on which the tax slab is decided for them. The taxes we pay are utilised by the government for developmental and security purposes such as constructing hospitals, schools, welfare centres, roads, maintenance of defence forces and the like. However, the Government has also made the provision of tax deductions for the welfare of the taxpayers.

donating to charity save tax

Applicability of tax deduction

The Government of India has made a provision under the Income Tax Act that relaxes the taxable amount of those who have made investment for the welfare of the self or the society. For instance, with regards to welfare of the self, if you are paying for house rent or children education; or you have invested on housing loan or medical insurance, you can avail tax deductions on your taxable income. Similarly, with regards to welfare of the society, is you contribute donations to registered non-governmental organizations in India, you can avail tax benefits under Section 80G of the Income Tax Act.

Charity – the noblest way to save tax

Investing on personal progress is a must, but at the same time, we must also look beyond ourselves. As citizens, it is our responsibility to contribute towards the upliftment and development of the country. Hence, as a means to encourage people to get involved with charitable organisations, the Government has made the provision of tax exemption donation.

Funds and fundraising are an important aspect of an NGOs operations and your contribution supports non-governmental organisations in India to make progresses in their respective fields of work. This in turn brings about a desirable and sustainable change in the society.

For instance, if you relate to women empowerment, you can choose any of the NGOs working in this field. Similarly, if you strongly identify with health and education of children, you can support child-centric NGOs such as The Akshaya Patra Foundation that provides free school meals to more than 1.8 million children on each school day across 12 States and 2 Union Territories of India.

When you donate to registered non-governmental organisations in India, you may either get 100% or 50% exemption on the donated amount based on a pre-decided slab and criterions set by the Income Tax Act depending on the type of NGO and its cause. Your support to any charitable causes makes you a part of the solution for several critical issues obstructing the progress of the society. Your choice of NGO could be any but your support potentially transforms the entire ecosystem of the society for the better along with making you eligible for tax exemption donation.

In conclusion, as you invest for yourself, take a moment to act for the society too of which you are an integral part!

Disclaimer: Each of the above-mentioned tax exemption plans/investments has its own terms and conditions. Hence, it is advised to understand the respective tax exemption clauses prior to making an investment or a claim.

50% Tax Exemption under Section 80G of Income Tax Act

Non-Governmental Organisations (NGOs) play a crucial role in addressing various socio-environmental issues such as illiteracy, hunger, malnutrition, poverty, unemployment, climate change, pollution, and the like. The operational success of NGOs can be attributed to their focussed and strategized functioning towards a particular issue or a set of related issues. For instance, The Akshaya Patra Foundation, an NGO in India aims at countering the twin problem of hunger and illiteracy by providing mid-day meals to children at government schools. No matter what causes a particular NGO is focussing on, all NGOs create a platform and welcome the participation of all of us. And, one of the many ways to get involved with a cause is to offer charity.

tax exemption benefit

Aside from the satisfaction of doing a philanthropic act, offering charity can also benefit you financially. Yes, by donating towards an NGO you can avail tax exemption under 80G deduction. As a move to encourage people and business establishments to support various causes, the Government of India introduced Section 80G to give tax exemptions on donations made towards charitable organisations. However, you will be eligible to avail this tax benefit only if you are donating towards certified NGOs and charitable institutions. By certification, it means the NGO or Trust must have a 12A Certificate along with tax exemption status under Section 80G, Section 80 GGA, and Section 35AC (i & ii, i & iii) of the Income Tax Act of 1961.

The limit of deduction is either 50% or 100% of the donated sum depending on the charitable organisation you have chosen. This is in view of the segregation made by the Income Tax Department wherein certain Trusts and NGOs can offer 100% deductions to their donors and some can offer 50% deductions on the donated amount. Well, one such registered NGO in India that provides tax benefits for your donations is The Akshaya Patra Foundation. Akshaya Patra is a mid-meal NGO serving school lunch to children in government and government-aided school across 12 states of India.

  • The Foundation is registered as a not-for-profit organisation under the Indian Trusts Act, 1882 (Reg. No. 154).
  • It is registered under Section 12A (a) of the Income Tax Act, 1961.
  • The Foundation is also registered under Section 6 (1) (a) of the Foreign Contribution (Regulation) Act, 2010 (FCRA Reg. No. 094421037).

As per the revised tax exemption act, effective 1 April 2017, donations above Rs. 500 to Akshaya Patra will be eligible for 50% tax exemption under Section 80G of Income Tax Act. But, you must note that a cash donation of above Rs. 2,000 is not applicable for 80G certificates. The benefits of 80G deduction are applicable only for Indian and NRI donors (Indian citizens, holding an Indian passport). To know about tax exemption for foreign donors, click here.

By contributing to Akshaya Patra, you will help in providing school lunch to millions of children who come socio-economic background. The school lunch helps such children to continue schooling by countering classroom hunger. The education and nourishment they receive through the Mid-Day Meal Programme empower them to grow up to be skilled and resourceful citizens of the nation. This means by donating towards the mid-day meal cause, you are supporting zealous, young lives thereby contributing to nation-building. And, simultaneously, you are also benefitting from income tax exemption, making it a win-win situation for the cause and you!

Well then, go ahead and begin the ripple effect of charity by choosing to donate online to charity or offer an offline donation. Your charitable contribution will potentially create a healthy, educated, and responsible generation.