As the tax season rolls around, most individuals and businesses are scrambling to find ways to reduce their tax liability. However, one often overlooked way to maximize your tax benefits is through donations to registered non-governmental organizations (NGOs). Not only are you supporting a good cause, but you can also take advantage of significant tax benefits.
In India, donations made to NGOs registered under Section 80G of the Income Tax Act are eligible for deduction from taxable income. This deduction is currently available for donations up to INR 2,000 for cash donations made in excess of INR 2,000. Additionally, donations towards specified causes such as disaster relief, welfare of senior citizens, Swachh Bharat Abhiyan, and National Children’s Fund are eligible for 100% deduction without any upper limit.
So, how can you maximize your tax benefits through donations to NGOs? Here are some tips to keep in mind:
1. Choose a reputable NGO: Ensure that the NGO you are donating to is registered and authorized to receive donations under Section 80G. You can check this information on the NGO’s website, or through the Ministry of Corporate Affairs’ portal. Also, make sure that the NGO’s cause aligns with your own values and interests.
2. Keep documentation: When making a donation, ensure that you receive a receipt or a certificate from the NGO. This document will be necessary when claiming the deduction under Section 80G. Some NGOs also provide donors with a 12A certificate, which verifies their registration under the Income Tax Act.
3. Plan your donations: Donating in a lump sum at the end of the year may not necessarily maximize your tax benefits. Instead, consider setting up regular donations throughout the year. This way, you can spread out your deductions over multiple financial years and maximize your tax benefits.
4. Non-cash donations: Donating goods or services can also be eligible for a tax deduction. However, there are specific rules and restrictions around these types of donations. For instance, donations in kind such as food, clothing, and medicines are eligible for deduction only if such items are used for the purpose of relief work. Similarly, donating property or stocks may also be eligible for a tax deduction, but the donor must ensure that the NGO is authorized to receive such donations.
In conclusion, donating to an NGO not only helps support a good cause but can also provide significant tax benefits. By following these tips, you can maximize your tax benefits while contributing to causes that matter to you. Remember to keep documentation, plan your donations, choose a reputable NGO, and educate yourself on the rules and restrictions around non-cash donations. Happy donating!