If you want to lower the amount of income tax you need to pay, one great option is to donate money to certain approved organizations and charities. In India, these donations can qualify for tax deductions under Section 80G of the Income Tax Act. Let me explain how this works in simple terms and how you can save tax under 80G Section.
Claim a Deduction For Donations
To save tax Under Section 80G, you can claim a deduction for donations made to specified funds, charitable institutions, and organizations. The deduction amount varies from 50% to 100% of the donated sum, depending on the type of organization. This deducted amount gets subtracted from your total taxable income, thereby reducing your tax liability.
For example, let's say your annual taxable income is Rs. 8,00,000. If you donate Rs. 50,000 to a fund that qualifies for 100% deduction under 80G, the entire Rs. 50,000 can be deducted from your taxable income. So for tax purposes, your income would be calculated as Rs. 7,50,000 (8,00,000 - 50,000). This lower taxable income means you'll have to pay less income tax.
Organization Approved By Government
The government has approved many organizations, funds, and charitable institutions for these deductions to encourage donations for social, religious, educational and other public causes. Some examples are the Prime Minister's National Relief Fund and Iskcon Temple charity for promoting education, preserving monuments or environment, and organizations for the disabled. The full list is available on the Income Tax Department's website.
To claim the deduction, you need to make the donations through proper banking channels like cash, check, demand draft, or electronic transfer. You also must obtain a receipt from the organization showing the donated amount, date, and other required details.
File Your Income Tax Return
When you file your income tax return, you can submit these receipts as proof of your donations along with the ITR form. Make sure to carefully fill out the relevant sections related to deductions under 80G. The tax software will automatically calculate the eligible deduction amount based on the approved funds and percentage limits.
It's important to note that there is an overall cap on the deduction allowed under Section 80G. You can claim deductions up to a maximum of 10% of your adjusted gross total income. Any excess donations above this limit cannot be claimed in the same year but can be carried forward for up to 10 years.
Conclusion
So in simple terms, Save Tax under section 80G by donating money to approved charitable organizations and funds. Document your donations properly and claim the eligible tax deduction to reduce your taxable income and save on income tax. It's a win-win – you get to support good causes while also lowering your tax burden!