They say, no good deed goes unrewarded. This is especially true if you’ve made a financial donation. The Income-tax Act under section 80G offers a tax deduction for donations to specific charitable institutions.
The amount of deduction
It is 50% or 100% of the amount you contribute, depending on the kind of charitable institute you donate to. For instance, you will get a 100% deduction if you donate to Prime Minister’s National Relief Fund, The Prime Minister’s Armenia Earthquake Relief Fund and The National Foundation for Communal Harmony, to name a few.
To get a 50% deduction, you can donate to institutes such as The Jawaharlal Nehru Memorial Fund and The Prime Minister’s Drought Relief Fund. If you donate with the objective of getting a tax benefit and aren’t very specific about the cause or organization, you may as well donate to the charities which give you a 100% deduction.
Exceptions to deductions
Though there is no limit on the total deduction that you can claim under section 80G, there are specific organizations, where the total deduction is limited to 10% of the adjusted gross total income. So if your total income is Rs 1 lakh and you donate Rs 20,000, which is 20% of your income, you will still get a tax deduction of only 10% or Rs 10,000.
Your adjusted gross total income is your gross total income minus all exempt income and all other deductions, apart from deduction under section 80G.
What to keep in mind
You need to ensure that you provide the proof for donation to take the benefit under the section. The institute to which you donate gives a stamped receipt for the same. You qualify for deduction only if you do it through cash or cheque. Buying a computer for the trust or donating furniture won’t give you a deduction.