Planning Taxes? Donate Well

Famines across India have been responsible for concentrated hunger and malnutrition through the ages in many regions. Moreover, the pandemic taught us that hunger and malnutrition can hit our people in the 21st century too. Is it not extremely unfortunate that India has dual identities of being a power to be reckoned with in space missions and simultaneously, have the reputation of being home to hungry millions? Add to that the malnutrition levels. According to a report, by 2022 one third of India’s children will be wasted, stunted, underweight or undernourished.

Global Hunger Index (GHI) ranked India 94th out of 107 countries as recently as October 2020. GHI 2020, a peer-reviewed annual report, had described the hunger levels in India as “serious”. The GHI is based and calculated on four indicators: undernourishment, child wasting, child stunting, and under-five child mortality. During the nationwide lockdown, the entire country came forward to address a single cause – managing the nation's hunger and consequent malnutrition. 

Realising early signs of malnutrition and hunger among children from underserved sections of society, many corporates jumped in to support feeding programs, thereby working towards the betterment of the country and its human assets. Unsurprisingly, empathetic individuals have also chipped in. 

Tax-benefit 

As per the prevailing income tax provisions, donations to charitable organisations or institutions recognised by Income Tax Dept under Section 80G of the Act,  will be eligible for 50 per cent tax deduction from their taxable income. Contributing towards a noble cause and at the same time getting a tax benefit becomes food for the soul and savings on the wallet!  It is simple, transparent, and accountable. The exemption is calculated by reducing 50 per cent of the donated amount from your taxable income. For instance, if your taxable income per year is Rs 200,000 and you donate Rs 5,000 then your net taxable income will become Rs 197,500 after getting Rs 2,500 (which is 50% of the Gross donation of Rs.5000 ) as a tax rebate. (Your tax will now be calculated on this new amount basis the prevailing tax rates.). This tax benefit can be claimed by any taxpayer – individuals, company, firm, or any other person.

Fact-check

 It is important to be well-informed about this tax-saving option. You must keep in mind that all deductions are not eligible for tax-exemptions under section 80G, hence you need to choose carefully. There are certain funds/ trusts which have an exemption certificate and donations to only those will be considered. Also, the contribution has to be made online/ cheque/draft/cash. However, one must note that any donation in cash exceeding Rs 2,000 will not be eligible for deduction. 

Taking the right decision

So, as we approach the financial year-end, it is the right time to evaluate and make the right decisions. Your auditor/ company’s finance department will require proof of donations. Now is the time to do it without further delay.  Contributing to a cause such as a food program can be very gratifying and given the benefits, you might want to consider it. In a way this your contribution to the have-nots. As a responsible citizen, the least we can do is to donate and fight food insecurity, one of the major issues plaguing our country.

As a wise man rightly said – “If you knew what I know about the power of giving, you would not let a single meal pass without sharing it in some way.” Go ahead bring on that smile to few unfortunate children by sponsoring food programs that give you tax breaks too! Donating to the world’s largest feeding program can also be a smart decision!

The author is Chief Marketing Officer, The Akshaya Patra Foundation

DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.