Donating to an NGO (Non-Governmental Organisation) is a powerful way to support causes that you care about while also gaining financial benefits in the form of tax savings. In India, the government encourages charitable contributions by offering tax deductions for donations made to registered NGOs. This system not only promotes philanthropy but also allows taxpayers to reduce their taxable income.
According to a recent report, only about 4% of India’s population pays income tax, making it even more important to take advantage of tax-saving opportunities like these. Let’s discuss how donating to an NGO can help you save on taxes, what you need to consider when making such donations and the broader benefits of this practice.
Understanding Tax Deductions for Donations
The Income Tax Act of India provides specific sections that offer tax benefits to individuals and companies making donations to registered NGOs. The most prominent section is Section 80G, which allows for tax deductions on donations.
Section 80G of the Income Tax Act
Section 80G offers tax deductions to taxpayers who donate to charitable organisations. These organisations must be registered and recognised by the Income Tax Department of India. Donations made under this section can qualify for deductions ranging from 50% to 100% of the donated amount, depending on the nature of the NGO and the cause it supports.
- 50% Deduction: Most donations to NGOs fall under the 50% deduction category, meaning you can deduct half of the donated amount from your taxable income.
- 100% Deduction: Donations to certain specified funds, such as the National Defence Fund or the Prime Minister’s National Relief Fund, qualify for a 100% deduction.
It’s important to note that not all donations qualify for a tax deduction under Section 80G. To be eligible, the donation must be made to an NGO that is registered under this section and approved by the government.
Eligibility for Deductions
To claim tax deductions under Section 80G, you must ensure that the NGO is eligible for such deductions. This involves checking whether the NGO is registered under Section 12A of the Income Tax Act, which is a prerequisite for organisations to be eligible for receiving donations that qualify for tax benefits.
Limitations on Deductions under Section 80G
While donations to NGOs can offer significant tax benefits, there are some limitations:
- Percentage of Gross Income: The total deductions that can be claimed under Section 80G are capped at 10% of the donor’s gross total income. Any donation amount exceeding this limit cannot be claimed as a deduction.
- Donation Receipts: To claim the deduction, you must have a valid receipt from the NGO. This receipt should include details such as the name and address of the NGO, the PAN (Permanent Account Number) of the NGO, the donor’s name and the amount donated.
How to Donate to an NGO and Save Tax?
With the rise of online platforms, donating to an NGO has become more accessible and convenient. Here’s a step-by-step guide on how you can donate to an NGO and enjoy tax benefits:
1. Choose the Right NGO
Start by selecting an NGO that aligns with your values and the causes you wish to support. Whether you’re passionate about education, healthcare, environmental conservation or animal welfare, there are numerous NGOs working in various fields. Make sure the NGO is registered under Section 12A of the Income Tax Act and approved under Section 80G to ensure your donation is eligible for a tax deduction.
2. Research and Verify
Before making a donation, it’s important to research and verify the NGO’s credentials. Check their registration status on the Income Tax Department’s website (https://www.incometax.gov.in/iec/foportal) or ask the NGO for their registration details. This step is vital to ensure that your donation is going to a legitimate and credible organisation.
3. Visit the NGO’s Website or Donation Platform
Once you’ve selected an NGO, visit their official website or the donation platform they use. Most NGOs provide an easy-to-navigate donation page where you can choose the type of donation you wish to make, such as a one-time donation, a monthly donation or a donation towards a specific project.
4. Select the Donation Type
Different NGOs offer various donation options. You can choose between one-time donations, recurring monthly donations or even project-based donations where your contribution goes towards a specific initiative. Choose the option that best suits your financial situation and philanthropic goals.
5. Provide Your Details
When making the donation, you’ll be required to enter your personal details, including your name, contact information and PAN (Permanent Account Number). Providing your PAN is essential, as it allows the NGO to issue a receipt that you can use to claim your tax deduction.
6. Make the Payment
NGOs typically offer multiple payment options, including debit/credit cards, net banking, UPI and e-wallets. Choose your preferred payment method and complete the transaction. Make sure to double-check all details before confirming the payment.
7. Receive and Save the Donation Receipt
After the payment is processed, the NGO will send you a receipt or donation certificate, usually via email. This receipt is critical for claiming your tax deduction, so be sure to save it. The receipt should include all necessary details, such as the NGO’s name, address, PAN and the donation amount.
Also Read: How To Join an NGO and Make a Difference?
Broader Benefits of Donating to an NGO
Beyond the tax benefits, donating to an NGO has several broader benefits, both for the donor and society.
1. Social Responsibility
By donating to an NGO, you contribute to the welfare of society and help address various social issues. Whether it’s providing education to underprivileged children, supporting healthcare initiatives or aiding disaster relief efforts, your donation makes a tangible difference in people’s lives.
2. Promoting a Culture of Giving
When you donate to an NGO, you set an example for others to follow. This can encourage more people to contribute to social causes, creating a ripple effect that benefits society as a whole. The culture of giving strengthens communities and fosters a sense of shared responsibility.
3. Personal Satisfaction
Donating to a cause you care about can bring a sense of fulfilment and satisfaction. Knowing that your contribution is making a positive impact can be a rewarding experience, both emotionally and spiritually.
4. Building a Better Future
Your donations help NGOs continue their vital work, whether it’s fighting poverty, protecting the environment or advocating for human rights. By supporting these causes, you’re contributing to building a better, more equitable future for all.
5. Networking and Community Building
Donating to NGOs can also help you connect with like-minded individuals and organisations. Many NGOs offer opportunities for donors to engage with their work more closely, such as volunteering, attending events or participating in community projects. This can lead to new friendships, professional connections and a deeper understanding of the issues you care about.
Important Considerations When Donating
While donating to an NGO is a generous and impactful way to contribute to society, there are some important considerations to keep in mind:
1. Research the NGO Thoroughly
Ensure that the NGO is credible and transparent about how they use donations. Look for NGOs that regularly publish reports on their activities, finances and the impact of their work. This transparency builds trust and ensures that your donation is used effectively.
2. Understand the Tax Implications
While donations offer tax benefits, it’s essential to understand the specific implications for your financial situation. Consulting with a tax advisor can help you navigate the details and ensure you’re making the most of the available deductions.
3. Be Aware of Scams
Unfortunately, there are fraudulent organisations that pose as NGOs to solicit donations. Always verify the legitimacy of an NGO before making a donation and be cautious of unsolicited requests for donations, especially online or over the phone.
4. Consider the Long-Term Impact
Think about the long-term impact of your donation. Supporting NGOs that work on sustainable and long-term projects can create lasting change. Consider committing to regular donations to help NGOs plan and execute long-term initiatives.
Looking to Make a Meaningful Impact While Also Saving on Taxes?
Donating to an NGO is a powerful way to contribute to society while also enjoying tax benefits. By taking advantage of the provisions under Section 80G of the Income Tax Act, you can reduce your taxable income and support causes that matter to you.
Donate with Aashritha Charitable Trust today. We are fully sanctioned under Section 80G, ensuring that every donation you make is eligible for tax benefits. Rest assured, your contributions are entirely directed towards social development causes like Elderly Care, Hunger Elimination, Assistance to Underprivileged Children in Education and Women Empowerment. Visit our donation page to contribute and make a difference.
For those interested in volunteering beyond donations, you can also join our efforts. Visit our volunteer page to get started.
Also Read: How To Secure CSR Funds for an NGO
