NGOs have been recognized as key actors in promoting social justice, human rights, and environmental sustainability, making their work essential for the creation of a more equitable and just society. The funding of NGOs is solely dependent on donations, which underscores the significance of contributions from individuals and organizations alike. To incentivize and encourage donations, the government has introduced 80G tax deduction, which has been instrumental in motivating individuals to contribute to the funding of NGOs.
In practice, two types of
80G deductions for NGOs have been observed. The first type allows for a 100%
tax incentive of the donated amount when contributions are made to the Prime
Minister's or Chief Minister's relief fund, which are primarily raised to aid
individuals impacted by natural disasters. The second type pertains to
non-governmental trusts or NGOs, where donors receive a 50% tax incentive of
the donated amount. As highlighted earlier, NGOs operate in society with the
objective of improving the lives of individuals and communities at large.
The government in the year 2020 implemented
a new tax regime for individuals, companies, and other taxpayers. This regime
requires taxpayers to pay taxes at a reduced rate by waiving all tax incentives
and deductions, including those related to charitable donations. As a result,
individuals who opt for the new tax regime will no longer receive any tax
benefits for making donations. However, taxpayers still have the option to
choose the old tax regime, where tax incentives for donations are allowed.
Under the old regime, individuals who make donations to charitable
organizations can claim deductions and receive tax benefits.
It is important to note that at present the
new tax regime is not mandatory, and taxpayers can choose the regime that is
most beneficial for them based on their financial situation and individual
circumstances. For those who prioritize charitable giving and wish to receive
tax benefits, the old tax regime may be the most appropriate choice.
The government is currently advocating for
a new tax regime that is set to replace the existing tax structure. This new
system aims to simplify the taxation process by eliminating multiple tax rate
options and streamlining the tax-paying process for individuals and businesses. It is anticipated that in the next couple of
years, the old tax regime will be phased out, and taxpayers will be required to
adopt the new tax regime.
Hence lack of any
incentive, discourage many individuals from contributing to charitable causes,
which could result in reduced funding for NGOs and PM & CM relief funds and
this raise concerns on charitable donations.
The impact of reduced funding for these
organizations could be severe, particularly considering the critical role they
play in promoting social justice, human rights, and environmental
sustainability. Many of these organizations operate on a shoestring budget and
rely heavily on donations to support their operations and programs.
Moreover, PM & CM relief funds are
crucial in providing aid and support to individuals and communities affected by
natural disasters. The reduction of funding for these relief funds could have
severe consequences for individuals and communities impacted by natural
disasters, leaving them vulnerable and without necessary support.
In conclusion, the proposed abolition of
the old tax regime could have significant consequences for charitable donations
and the funding of NGOs and PM & CM relief funds. It is essential that
policymakers consider the potential impacts of this change and explore
alternative methods for incentivizing charitable giving and supporting these
critical organizations.
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