To save tax, use cheque and not cash while donating to charity

• Taxpayers can benefit from the donations made to the charitable institutions via cheque and cash.
  
• Under Section 80G of the Income Tax Act, if the donation is paid via cash, the maximum deduction can go up to ₹2,000.
  
• There is no bar on the deduction amount if the payment is done through cheque or digital payment methods.
  
• While some donations qualify for 100% tax deduction, others may only account for 50% deduction from the donated amount.

As the current financial year approaches its end, salaried employees and taxpayers are figuring out ways to save on the taxable income. Taxpayers can benefit from the donations made to the charitable institutions both via cheque and cash.

Under Section 80G of the Income Tax Act, if the donation is paid via cash, the maximum deduction can go up to ₹2,000. Earlier, the limit for cash donations was ₹10,000 — which was reduced to do away with fake donation receipts.

However, there is no bar on the deduction amount if the payment is done through cheque or digital payment methods.

But not every relief fund or charity can be claimed for deduction from gross total income. That includes donations to political parties and foreign institutions — which are not eligible for tax rebate.

While some donations qualify for 100% tax deduction, others may only account for 50% deduction from the donated amount. The deductions can be claimed by anyone who has made the donation — organisations and individuals.

The Income Tax Department maintains a list of institutions and the limit on deduction against each of them. National Defence Fund, Prime Minister’s National Relief Fund, National Foundation for Communal Harmony and National Children’s Fund are a few charitable institutions set up by the government that qualify for 100% deduction.

On the other hand, trust funds like Jawahar Lal Nehru Memorial Fund and Prime Minister's Drought Fund fall under the category of 50% tax deduction.

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