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New tax regime sops may cut donations

Mumbai, Feb 10, 2023

Retail donations to charities could see some impact as more individuals are likely to move to the new tax regime following higher exemptions announced in the recent Budget.

Based on the government’s expectation that up to two-thirds of taxpayers may opt for the new tax regime, which is the default now, organisations that work closely with NGOs feel this could discourage individuals from making charitable donations. However, individuals still have the option to continue with the old tax regime — which remains untouched — and claim deductions under section 80G of the Income Tax Act.

NGO payment platform DanaMojo founder & MD Dhaval Udani said, “The youth become aware of charitable donations not only as a way to save tax but also impact society and make a difference and become more engaged with causes. By making the new tax regime (without exemptions) the default one, the government will snatch these valuable learnings. This is very short-sighted.”

Udani said the government should instead carve out an exception and allow 80G deductions, much like what the US did via its US 2017 Tax Cuts and Jobs Act wherein it allowed charitable deductions even for those falling below the limit and not itemising their deductions.

However, donation and fundraising platform Give COO Sumit Tayal does not think the new tax regime will adversely impact giving. “The decision to donate is driven by an emotional connect between the donor and the cause, more than just financial considerations,” said Tayal.

ions is an eligible deduction under section 80G of the Income tax Act, 1961. This deduction was not allowed under the new tax regime even currently, said Parizad Sirwalla, partner and national head - tax, global mobility services, KPMG in India. Sirwalla added, “There is no change to the same under the amended new tax regime for individuals according to Budget 2023. Hence, deductions for donations is not allowed even under the amended new tax regime. If an individual taxpayer wants to claim such specified donations as a deduction, he/ she can still do so by opting for the old tax regime if the same is more beneficial.”

[The Times of India]

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