Claiming tax deduction on donation can be complicated
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.
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.
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.
