Tax Exemptions For Donations in India

In India, donating to non-governmental organizations (NGOs) is not only a noble act but also a smart financial move, thanks to tax benefits under Section 80G of the Income Tax Act, 1961. This provision allows donors to reduce their taxable income while supporting charitable causes, creating a win-win situation.

Under Section 80G, donations to registered NGOs qualify for deductions ranging from 50% to 100% of the donated amount, depending on the organization and its purpose. For instance, contributions to funds like the Prime Minister’s National Relief Fund or specific government-approved initiatives, such as Swachh Bharat Kosh, often enjoy a 100% deduction without any upper limit. Conversely, donations to many private NGOs, like those focused on education or healthcare, typically qualify for a 50% deduction, capped at 10% of the donor’s adjusted gross total income (AGTI). This means if you earn ₹10 lakh annually and donate ₹1 lakh to an eligible NGO, you can claim ₹50,000 as a deduction (50%), reducing your taxable income to ₹9.5 lakh, provided it’s within the 10% AGTI limit.

To avail of these benefits, the NGO must be registered under Section 80G with the Income Tax Department. Donors need to obtain a receipt detailing the donation amount, the NGO’s 80G registration number, and their PAN. Payments must be made via cheque, demand draft, or electronic transfer—cash donations exceeding ₹2,000 don’t qualify. When filing income tax returns, these details must be submitted under the old tax regime, as the new regime doesn’t allow such deductions.

Beyond tax savings, donating fosters social good, supporting causes like child welfare or rural development. By planning donations strategically, individuals can lower their tax liability while making a difference. Always verify the NGO’s credentials and consult a tax expert to maximize benefits legally and effectively.