Tax Savings through Charity

Sharing is Caring and using the same for tax benefit.

To help in the hour of need is humanity and as much a part of the Indian Culture.

McKinsy & Company in its report, Designing Philanthropy for Impact, sums up the evolution of philanthropy in India, “India has a long tradition of philanthropic giving, with all religions promoting the concept of charity. Until the 1800s, giving in India was largely religious in nature and motivated by the search for individual salvation.

“Later, philanthropy also began to be directed toward social causes such as education and women’s rights. Throughout the 20th century, leading Indian industrialists established foundations and other charitable institutions of national importance (for example, the Indian Institute of Science, catalyzed by the Tata Group), some of which were partly inspired by the country’s freedom movement.”

Adding to this J.C. Sharma, Vice Chairman and Managing Director, Sobha Developers says, “We have been lucky to have had the opportunity to grow and live the lifestyle that not many people are privileged to lead. I believe it is our obligation to do our bit for the society.”

At one point or the other, most people tend to be involved in helping an unknown person through charity or philanthropy but there were some common queries among people.

The biggest concern was, ‘was the money properly utilized’ for the purpose for which they had been giving out charity.

“It was a big challenge to identify NGO's who genuinely work for the poor and needy of the society. So to best utilize our resources for a cause we created our own charity wing- The Paras Foundation,” says Pravesh Jain, Founder Paras Foundation and Managing Director, Paras Dyes and Chemicals.

Jain says, “It has been almost a three decade since my brother, Rakesh Jain, and I ventured into opening an old age home- Ghauranda.” The idea was to give home to homeless, our old age home provides comfortable accommodation, healthy food, health care, recreations etc. all free of cost.

“We do all our charity works through our own foundation as it is easy to monitor and evaluate. Hardly have we donated to others. But yes, in any special situation we do so after evaluating their track record and their ethics and dedication,” says Jain.

Prema Sagar, Founding Trustee, Genesis Foundation says, “There are various factors that go into evaluating an NGO. Some of the important parameters are background of founders, number of years in operation, impact of work, transparency, organizations associated with the NGO, reputation etc.”

Sagar further adds that donors can ask the NGO to provide details of how their funds have been utilized. And that the NGOs should also as a practice inform its donors about the impact that has been made by donations.

Rohit Shah, CEO, GettingYouRich and a Certified Financial Planner, says “While clients are donating money, they have no way to actually monitor the usage etc.” He then points out that organizations like www.giveindia.org are doing a good job by providing regular updates to donors. As an example, if someone has opted for education fees support to a girl, then they send progress reports on a regular basis.

The second aspect of the charity is that many people who are not aware that their charitable cause can also result in tax benefit. Samir Rahman, an IT consultant from Bangalore says, “I give out charity to religious and other NGOs in the space of the child support but I don’t look into the tax benefit angle of the same.”

The form 16 given to salaried individuals doesn't show any deductions on donations made under Section 80G. Therefore, any donation made that can qualify for tax deduction under Section 80G, for which you will have to furnish details of donations made while filing your return and claim a refund.

Post-retirement from Paramilitary Forces, Rati Acharya went to see NGOs and felt it was more about collecting money than serving the needy. So she started using her expertise as a doctor for serving the needy. "Being a doctor I started checking patients free of charge, started going for medical camps. And over a period of 15 years discovered an NGO who genuinely help people; they don’t take aid from anywhere and they organise their own camps and help people," says Acharya.

Acharya says, “If charity is to done with the aim of saving save taxes then it can be done by donating to an NGO, where the work of the NGO gives it the benefit of section 80G.” And then she adds, “If one really wants to help then that individual should give their time along with money, and they should see the effort people are putting before donating because it’s not about just helping; it’s about helping the one person who genuinely needs it.”

Ramesh Krishnan, a Cost & Management Accountant expert with Olive Lifesciences says, “My advice is that, people who want to give charity & donation should choose the institution approved by Income tax.” Giving an example he says that Government funds like – Prime Minister Relief Fund, Chief Minister Relief Fund, Earth-quake Relief Fund, Flood Relief Fund has 100% deduction eligibility etc. which is more beneficial. 

The third thing that may require some attention is where individuals would want to give out charity but they are not sure who to give. Tahseen Alam, Regional Advocacy Manager-EMPHASIS at CARE says, “It is important that one identifies for what purpose they would like to contribute. India is an emerging economy but there still exists massive inequality and poverty among sections of the population. Individual contributions play a role in addressing critical issues including children's education, women's empowerment, disaster response, livelihood support, etc.”  

(This is the submission draft. The story had appeared in June issue of Money Today. You can read the final version Click here or copy paste the given below link-- 

http://businesstoday.intoday.in/story/tax-saving-tips-contribute-to-charities-and-ngos/1/206573.html)