Benefit of Donation to NGO and Political Parties
- admin
- 06-Mar-2025
Benefit of Donation to NGO and Political Parties
There are benefits of donation to NGO and political parties in India, such as a tax rebate for donations under the 80G income tax act. When you donate money to an NGO in India, you are giving to the cause of social welfare and also receive monetary advantages. Similarly, donations to political parties in India are tax deductible under Section 80GGC, in support of clean and clear funding. There is even a cap on donating money to a political party in India, as per rules in the Companies Act 2013. Thus, a donation to an NGO for tax rebate or a donation to political parties for tax deduction can help a taxpayer reduce his taxable income and give towards a cause.
80G deduction and 80G exemption under the Income Tax Act can be claimed for donations to trusts that are charitable by individuals as well as firms. Depending upon the organization, a donation might be eligible either for 100% exemption or 50% exemption. This is possible if the donation made is to an NGO that is already on the exemption list of 80G. To get the most benefits, prior to donating you need to cross-check the exemption list of 80G.
|
Donation Type |
Applicable to Individuals |
Applicable to Companies |
Mode of Payment |
|
Donation to Registered NGOs (80G) |
Yes (50% or 100% exemption based on organization) |
Yes (50% or 100% exemption based on organization) |
Cheque, Demand Draft, Online Transfer |
|
Donation to Political Parties (80GGC) |
Yes (100% exemption, non-cash payment required) |
No |
Cheque, Demand Draft, Online Transfer (No cash above Rs. 2,000) |
|
Corporate Donation to Political Parties (Companies Act 2013) |
No |
Yes (Up to 7.5% of net profits) |
Cheque, Demand Draft, Online Transfer (No cash above Rs. 2,000) |
|
Donation to Government Relief Funds (100% Exemption) |
Yes (100% exemption) |
Yes (100% exemption) |
Cheque, Demand Draft, Online Transfer |
|
Donation to Unregistered NGOs or Trusts |
No tax benefit |
No tax benefit |
Not applicable |
According to the 80G income tax act, taxpayers are eligible to claim deductions in respect of contributions to certain organizations. The primary aim of this section is to incentivize the donors by giving them tax relief. Political party contributions are not part of the 80G exemption list but are eligible for deduction under 80GGC. The main reason for the 80G exemption is to encourage charity by lowering the tax base. Receipt of contribution and ensuring a donation to the 80G exemption list is required for taxpayers.
To obtain an Income Tax Exemption for donating to NGO in India, you must ensure that the NGO is registered in the list of 80G exemptions. The relief under 80G is provided to individuals, Hindu Undivided Families (HUFs), and corporates. But under which section donations are provided to political parties? The answer is Section 80GGC, under which one is eligible for relief in tax for providing donations to political funding. Furthermore, donations of cash to political parties are not acceptable under relief in 80G; payments must be in electronic form or cheque.
To qualify for Donation to NGO Tax Exemption, do the following:
Donation to charitable trust under the Income Tax Act allows taxpayers to avail 80G exemption facilities. Charitable trusts should be on the 80G exemption list and should utilize at least 85% of their amount for public welfare. Proper receipt of donation should be received to avail the 80G deduction while filing the ITR. There are some trusts that can claim 100% tax exemption on donations, and hence it is advisable to find out the eligibility before giving a donation.
In order to be considered tax-exempt, donations have to employ a legal Mode of Donation under 80G Limit:
80G exemption list consists of such organizations that can get 100% exemption on donation:
To receive the deduction under 80G, the following documents required for Tax Exemption on Donation:
Disallowance of donation under Section 37 occurs when the donation does not qualify for the 80G deduction. Costs that are prohibited or costs that do not relate to business operations cannot be deducted as a deduction for income tax. Thus, companies need to follow rules while making a donation to a charitable trust under the Income Tax Act. In the event of non-compliance, the donation can be treated as a non-deductible expense, and this will increase the taxable income of the company.
ISKCON donations are exempted under the 80G provision if the donations to ISKCON come under the ISKCON Donation 80G Exemption Limit. To avail of income tax relief, you will have to take a receipt for donation from ISKCON mentioning their PAN, registration number, and donation amount to be eligible for tax relief. It is advisable to check if the specific branch or trust of ISKCON is registered under 80G before donating to ensure that you are eligible for relief from income tax.
The Donation to Political Parties Companies Act 2013 lets companies donate up to 7.5% of their average net profits. Donations to political parties are covered under Section 80GGC, individuals can get tax deductions for donations made to registered political parties. Donations can be made only through cheques, bank drafts, or electronic transfers because political parties cannot accept cash donations. This is because this provision makes political funding clean and provides tax relief to the donor. Donations can be made to political parties in various ways.
The list of political parties under 80GGC includes all registered parties that are eligible to receive donations for tax exemption. Donations to Political Parties in India make political funding transparent and provide donors with the option of not paying income tax on donations. To get information about all the political parties applicable for donations, check the list on the Election Commission of India (ECI) website.
Rules on Donations to Political Parties are:
Donation to Political Party Limit by Individual in India is not explicitly banned. But anything above Rs. 20,000 must be disclosed. Political party donation limit by salaried individual is not limited, as long as the donor is eligible for income tax exemption. Donors must ensure that the political party is registered under Section 29A of the Representation of the People Act, 1951, to be eligible for tax relief. It has to be recorded for the payment and receipt to be eligible for tax relief under 80GGC.
For salaried individuals, the Political Party Donation Limit for Salaried Person is the same as 80GGC. It is, however, important to ensure that the donation is eligible for the political party donation tax deduction. The exemption is capped on their taxable income, and therefore individuals cannot claim more than they are earning. Donations must be made through bank transactions to be eligible for the tax relief.
A political party donation receipt must have the following details:
Get your deductions under 80G, tax-free donations, 100% tax relief at the expertise of CA Amit Chawla & Co. Call for information and expert opinions at +91-9044742447 to help with your decisions, review the available options, and provide legal advice.
