There is a section 80G in the Income Tax Act, under which you get tax exemption on the money donated. By the way, everyone believes that he gives the money to charity, which has a lot of money, but in reality, you can save tax on a lot of money by donating it.
If you are told that you can save Rs 12,500 by donating Rs 1, would you believe it? Of course not, but it's true. Let's understand a situation, in which if you give 1 rupee in donation, it will help you to save tax up to about 12,500 rupees. Simply put, you will be able to save tax on around Rs 2.5 lakh.
According to the current system, how much tax will be levied?
If you understand the current tax slab, you get many deductions under the old tax system. If you are in that tax regime, then you will not have to pay any tax on taxable income up to Rs 5.5 lakh. In this, no tax is levied on anyone up to Rs 2.5 lakh.
At the same time, the benefit of a standard deduction of 50 thousand rupees is available. After this, if your total income remains below Rs 5 lakh or less, then under 87A, you get a tax rebate of Rs 12,500 under the 5% slab on Rs 2.5 lakh. That means you will not have to pay any taxes. But if your earning is Rs 1 more than this, then you will not get this rebate available on Rs 2.5 lakh.
Save Rs 12,500 by donating Rs 1
In such a situation, you can take advantage of Section 80G of the Income Tax Act. You donate one rupee under this. Now when you show 1 rupee in charity under 80G, no tax will be charged on that too. In this way again your taxable income will be Rs 5 lakh and you will not have to pay any tax on it. Here even though we have taken the example of just Rs 1, this amount can be more for you.
Suppose your total taxable income after standard deduction comes to Rs 5.10 lakh. In this way, you will have to pay a tax of Rs 12,500 at the rate of 5% on Rs 2.5-5 lakh and Rs 1000 at the rate of 10% on the remaining Rs 10,000, ie Rs 13,500 in total. In such a situation, if you donate Rs 10,000, then your taxable income will again be Rs 5 lakh and you will not have to pay any tax. That is, by giving Rs 10,000 to charity, you will save tax on Rs 13,500. In this way, your total profit will be Rs.3,500.
But this thing has to be kept in mind
You can save your money by donating, but keep in mind that the donation should be made during the same financial year for which you are filing ITR. That is, to take advantage of this, you have to start income tax planning from the beginning of the year itself. That is, if you want to save tax by giving 1 rupee to charity, then start the calculation in advance, so that you can know how much tax is going to be levied on you.
