Are you looking to donate for a social cause that can give you the joy of giving coupled with tax benefits? The commonly know option for availing tax benefit for charity is Section 80G under income-tax act. However, there is another superior option other than Section 80G for availing tax benefits for charitable purposes. Have you analysed tax breaks under Section 35AC of the Income Tax Act?
Donations made to institutions that have got permission to solicit such funds under Section 35AC can get you deduction of 100 per cent of your donations, whereas most charitable donations (barring a few specified funds) under Section 80G can get you a maximum deduction of 50 per cent.
Under Section 35AC of the I-T Act, the central government notifies institutions or eligible projects or schemes specified to be carried on by the said institutions and the estimated cost of the project. The eligible projects are listed for three years. For example, on Tuesday, the Ramakrishna Mission came out with advertisements soliciting donations for its 178-bed charitable hospital in Vridavan.
“Under Section 35AC, 100 per cent deduction is permitted for donation by individuals, corporates, firms and HUF who have income from the head ‘business’ or ‘profession’. Individuals not having business income i.e. salaried employees can also claim 100 per cent deduction under section 80GGA for deduction on donations made to eligible projects under section 35AC,” Sudhir Kaushik, Founder & CFO, TaxSpanner.com.
Section 35AC seeks to encourage business organisations to contribute more in social and economic welfare with corporate social responsibility (CSR) having been made mandatory. The section 35AC is one of the key provisions for raising resources for NGOs for specific purpose and cost.
Kaushik feels Section 35AC could be a superior option over Section 80G of I-T Act which also provides tax benefits for donations for charitable causes. “Section 35AC is not being used by NGO as compared to Section 80G. It was specifically enacted to give a tool in the hands of NGOs for mobilisation of funds from corporate sector by allowing 100 per cent deduction for donation in approved and notified projects. As against this, section 80G gives 50 per cent deduction in most cases. There are only a handful of funds under Section 80G, such as Prime Minister’s Relief Fund and National Children’s Fund, where 100 per cent deduction is permitted.