Donations made to hundreds of projects carried out by NGOs across the country will no longer be eligible for a 100% income tax (I-T) deduction in the hands of the donor from April 1. While tax savings are not the main purpose, if donations are made in March towards eligible projects, then donors comprising salaried employees could reap an I-T benefit.
At present, donations made for specific projects run by NGOs that have been certified under section 35AC entitle the donor to a 100% I-T deduction under section 80GGA in respect of the donated amount.
However, section 35AC has a sunset clause which expires this March. Section 80GGA is not as widely known as section 80G, which permits a 100% I-T deduction in respect of certain donations (such as PM’s National Relief Fund) and a 50% I-T deduction in most other cases.
“Taxpayers who do not earn income under the head `profits and gains of business and profession’, such as salaried employees, can claim the benefit of section 80GGA. While the employer cannot consider the donations made, while computing tax to be deducted at source against salary income, the employee can claim the benefit of the same in his I-T return and claim an I-T refund, if applicable,“ says Pradeep Mahtani, director, HelpYourNGO Foundation. A chartered accountant says, “In fact, if there has been a short deduction of tax at source and advance tax has not been paid by the salaried employee, by making donations eligible for I-T deduction up to March 31, the salaried taxpayer could mitigate his I-T penalty . Donors should ensure that they get the appropriate receipt.”
Notifications are issued by the finance ministry from time to time, certifying the projects that are eligible under section 35AC, the period of eligibility and also the total cost of the eligible project. For instance, as regards NGOs registered in Ma harashtra, these include projects by Magic Bus (skill development and livelihood programme), Association of Palliative Care (for a palliative care centre), Foundation of Promotion for Sports and Games (Olympic Gold Quest project) and Mesco (educational scholarships).