Claiming tax deduction on donation can be complicated

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During the covid-19 crisis, many people helped raise funds for those in need. If an individual had donated to a recognised institution, the act of kindness could help save tax.

However, there are also several conditions one has to meet to avail a tax deduction on donations. The deduction varies with the institution to which the donation is made.

First, not all donations qualify for a tax deduction. Also, you cannot get a 100% deduction for all kinds of donations.

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Second, only monetary donations qualify for the deduction. If you have donated in kind — food, clothes, medicines, etc- – it won’t be eligible for a tax deduction.

Third, the only donation made via banking channel qualifies for tax benefit. You should have used a debit card, net banking, cheque or UPI (Unified Payment Interface) for giving money. However, you can claim a tax deduction on donations up to 2,000 made in cash.

Fourth, the tax benefit available depends on the institution or fund to which the money was paid.

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You can get a 100% deduction for donations made to PM Cares, Prime Minister’s National Relief Fund, National Defence Fund set up by the Central Government and other such notified trusts, charities and funds.

A 50% deduction is available to Prime Minister’s Drought Relief Fund, Jawaharlal Nehru Memorial Fund, and so on.

For other donations, there’s a cap. For such contributions, taxpayers will first need to calculate their “adjusted gross total income”. They can get a 100% or 50% deduction subject to 10% of the adjusted gross total income.

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The adjusted gross total income is calculated by deducting exempt income, capital gains, etc., from the total income.

Also, keep in mind that you will need to have a receipt from the charity you have donated to and its address and PAN.

(Do you have personal finance queries? Send them to [email protected] and get them answered by industry experts)

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