Donations and tax: doing good while saving more

The short version

A donation to an approved charity or fund can be deducted from your taxable income, which lowers your tax. Three conditions decide whether you get anything:

1. You must be on the old tax regime. The new regime allows no donation deduction.
2. The recipient must be approved for it, and must report your donation to the tax department.
3. You must pay by a traceable method. Cash above ₹2,000 gets nothing.

The deduction was Section 80G of the Income-tax Act 1961. Under the Income-tax Act 2025, which took effect on 1 April 2026, it is section 133. The section number changed; the rules did not.

Four kinds of recipients

Not every donation is deducted in full. The law sorts recipients into four groups:

Most people give to the last group: a registered NGO, a temple trust, a school's charitable society. That means half the donation is deductible, and only up to a cap.

The 10% cap applies to your adjusted gross total income: your gross total income minus your other deductions (such as Section 80C and 80D) and minus long-term capital gains and short-term equity gains taxed at special rates. Donations above the cap in the capped groups are not deductible.

What a donation actually costs you

Take someone on the old regime with ₹30 lakh of salary income, in the 30% slab, who gives ₹1 lakh. With 4% cess, each rupee of deduction saves 31.2 paise.

At ₹30 lakh, the ₹1 lakh is well inside the 10% cap. Someone at a lower income in the 20% slab saves less on the same gift. Run your own figures in the income tax calculator.

Donations do not decide your regime by themselves

Because the deduction exists only under the old regime, regular donors often ask whether they should switch back to it. Usually the donation alone is not enough. The new regime has lower slab rates and a larger standard deduction, and at higher salaries the old regime needs about ₹8 lakh of deductions before it wins. A ₹1 lakh gift to an NGO adds only ₹50,000 to that total.

The donation deduction counts alongside the others the old regime allows: Section 80C, the extra ₹50,000 for NPS, health insurance, HRA and home-loan interest. Add them all up in the old vs new regime calculator. If the old regime already wins for you, donations add to the saving. If it does not, give for the cause, not the deduction. Choosing your tax regime and the full 80C menu cover the other deductions.

The paperwork that makes it count

The deduction is matched against what the charity reports, so the paperwork has to line up.

• Give your PAN to the charity. It reports each donation to the department in Form 10BD, under your PAN. Without the PAN, the donation is not on record.
• Get Form 10BE. This is the donation certificate the charity downloads from the portal after filing 10BD, normally by 31 May after the financial year. A plain receipt is not enough on its own.
• Check the approval. The charity's receipt or website should show its registration and approval number under the donation section. Unregistered bodies give no deduction, however worthy.
• Enter the details in your return. The schedule asks for the charity's name, PAN and address, the amount, and how much was cash. Your figures should match Form 10BE.

If your employer runs a payroll giving scheme, the donation usually appears in Form 16, but you still claim it in your own return.

What does not qualify

• Cash over ₹2,000. No deduction on any of it.
• Donations in kind. Clothes, food, books, equipment: no deduction, whatever they are worth.
• Gifts to individuals, such as paying a needy person's hospital bill directly. Generous, but not deductible.
• Payments that buy you something, like a school "donation" tied to admission.
• Unapproved trusts and foreign charities. The recipient must hold an Indian approval.

Political parties are covered by a separate deduction (Section 80GGC under the old numbering): contributions to a registered party are deductible in full, but only on the old regime and never in cash.

Claims are checked

Donation claims are one of the deductions the tax department matches most closely, because the charity's report sits next to your return. In recent years it has sent notices to taxpayers whose donation claims could not be matched to a real payment. A claim without a matching Form 10BD entry is likely to be questioned and disallowed. The safest donation is one paid from your own bank account to a charity that sends you Form 10BE.

For a family that already uses an HUF for other income, the HUF can also donate and claim the deduction separately; HUF: how a joint family can save tax explains how an HUF is taxed.

This post is educational, not tax advice; tax rules change, so check current law or a professional before acting.