NGO & Tax Benefits

NGO Tax Benefits: How to Claim Deductions & Best Tax-Saving NGOs in India

Non-Governmental Organizations (NGOs) play a vital role in social development, supporting education, healthcare, poverty alleviation, and other welfare activities. The Indian government encourages donations to NGOs by offering tax benefits under Section 80G and Section 35AC of the Income Tax Act, 1961.

Tax Benefits of Donating to NGOs:

• Donations to registered NGOs allow individuals and businesses to claim tax deductions.
• Some NGOs offer 100% tax exemption, while others provide 50% tax exemption based on their certification.
• Corporate donations can also be classified under Corporate Social Responsibility (CSR), making them tax-efficient.

Eligibility of NGOs for Tax Benefits:

• The NGO must be registered under Section 12A to be eligible for tax exemptions.
• The NGO must hold a valid 80G certificate issued by the Income Tax Department.
• Donations to specific NGOs engaged in scientific research, rural development, or government-approved projects may qualify for 100% deductions under Section 35AC.

By donating to eligible NGOs, individuals and businesses not only contribute to a social cause but also reduce their taxable income.

Best NGOs for Tax-Saving Donations

Government Policies on NGO Donations

How to Claim Tax Deductions?

Claiming tax deductions on NGO donations in India is a simple process, provided you follow the required steps and maintain proper documentation.

Steps to Claim Tax Benefits Under Section 80G:

1. Donate to an 80G-registered NGO – Ensure that the NGO has a valid 80G certificate issued by the Income Tax Department.
2. Collect a Donation Receipt – The receipt should include:
   • Name, address, and PAN of the NGO.
   • Donation amount (cash, cheque, or online transfer).
   • Name of the donor.
3. Verify the NGO’s Registration – Cross-check the 80G registration number on the Income Tax website.
4. Declare the Donation in Your Income Tax Return (ITR) –
   • While filing your ITR (ITR-1 or ITR-2), mention the amount under Section 80G.
   • Attach relevant documents for tax assessment (if required).
5. Ensure Compliance with Payment Mode Rules – Donations above ₹2,000 should be made via cheque, bank transfer, or digital payment (cash donations above ₹2,000 are not eligible for tax benefits).

Common Mistakes to Avoid:

• Donating to unregistered NGOs that do not provide tax benefits.
• Forgetting to collect and save the donation receipt.
• Claiming 100% deduction for an NGO that offers only 50% exemption.

By following these steps, individuals can successfully claim tax benefits on donations while supporting social causes.

Best NGOs for Tax-Saving Donations

If you’re looking for tax-efficient donations, it’s important to choose NGOs that are registered under Section 80G and Section 12A of the Income Tax Act.

Criteria for Selecting an NGO:

• Must be registered under Section 80G for tax exemption.
• Should have a transparent donation process with proper receipts.
• Preference for NGOs working in education, healthcare, rural development, and other social causes.
• Must have a strong track record of impact and credibility.

Examples of Reputed NGOs Offering Tax Benefits:

1. VWON Foundation – Focuses on financial and skill-based development, helping professionals save tax on donations.
2. Akshaya Patra Foundation – Provides mid-day meals to school children and offers 100% tax exemption under 80G.
3. CRY (Child Rights and You) – Supports children’s education and healthcare.
4. GiveIndia – A platform that connects donors with NGOs that offer tax benefits.
5. Goonj – Works in disaster relief and rural development.

Tip: Always verify an NGO’s 80G status before making a donation to ensure tax benefits.

Government Policies on NGO Donations

The Indian government has established several policies to encourage donations to NGOs and ensure transparency in the donation process.

Key Government Policies:

1. Income Tax Act, 1961 (Section 80G & 35AC) –
   • Allows tax deductions for donations to registered NGOs.
   • Some NGOs get 100% exemption, while others provide 50% exemption.
2. CSR (Corporate Social Responsibility) Regulations –
   • Under the Companies Act, 2013, large corporations must spend 2% of their net profits on social causes.
   • Corporate donations to registered NGOs can be considered CSR contributions.
3. Foreign Contribution Regulation Act (FCRA), 2010 –
   • NGOs receiving foreign donations must register under FCRA.
   • This ensures that foreign contributions are used transparently for social welfare.
4. Digital Donation Transparency –
   • Government initiatives like DARPAN (NGO registration portal) allow donors to verify an NGO’s status before donating.
   • The Income Tax website lists 80G-registered NGOs for easy verification.

By understanding these policies, donors can make informed choices while ensuring compliance with tax regulations.

Final Thoughts

Donating to NGOs is a great way to support social causes while benefiting from tax exemptions. Whether you are an individual or a corporate donor, choosing the right NGO and following proper documentation ensures a smooth tax-saving process.