Can individuals claim tax benefits for donations to charities? Are all donations made eligible for tax benefits?
Yes, individuals can claim tax benefits on eligible donations to charities. Deductions are available under Section 80G to any taxpayer i.e. individual - resident and non-resident, firm, HUF, company.
But, all donations are not eligible for donations. Tax deductions can be claimed only on specific donations, i.e. those made to prescribed funds and institutions.
What are the benefits available for deductions, in terms of percentage of the amount donated?
The tax benefits on donations are available under Section 80G of the Income Tax Act and have been segregated as follows:
- Those eligible for 100% deduction on the donation amount,
- Those eligible for 50% deduction on the donation amount,
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Those eligible for 100% or 50% deduction on the donation amount, subject to maximum of the 10% of the gross total income.
Is there an upper limit on the amount for purpose of claiming tax benefits?
No, there is no upper limit on the amount of donation. However in some cases there is a cap on the eligible amount i.e. a maximum of 10% of the gross total income.
The limit is to be applied to the adjusted gross total income. The 'adjusted gross total income' for this purpose is the gross total income (i.e. the sub total of income under various heads) reduced by the following:
- Amount deductible under Sections 80CCC to 80U (but not Section 80Gl)
- Exempt income
- Long-term capital gains
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Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies.
Should any documents be maintained by the donors for the purpose of claiming tax benefits?
Yes, the donor is required to maintain a proper receipt as evidence of the payment of donation.
Can an individual claim benefits for donations made, if he doesn't hold the necessary documentary evidence?
In order to claim the benefit for donations made, it is necessary to furnish, along with the return of income, the proof of payment made towards the donation to the eligible institution or fund. Tax benefits cannot be claimed without aforementioned documents.
Can NRIs claim tax benefits for donations made to charities?
Yes, NRIs are also entitled to claim tax benefits against donations, subject to the donations being made to eligible institutions and funds.
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