All Donations made to CAN Foundation shall be Tax-Free
Overview: Tax-Free Donations to Charitable Organizations
In India, donations made to certain registered charitable organizations are eligible for tax exemption under the Income Tax Act, 1961. This incentivizes philanthropy by reducing the donor’s taxable income and encourages funding for social causes.
Understanding the CAN Foundation Context
CAN Foundation is a registered charitable trust/non-profit organization engaged in activities for social welfare (education, health, environment, etc.).
To promote donations, the government (usually through the Income Tax Department) grants tax exemption status to donations made to such foundations.
This means donors can claim deductions on donations made to CAN Foundation, effectively making the donations tax-free for the donor.
Legal Framework Governing Tax-Free Donations
Section 80G of the Income Tax Act, 1961
Section 80G provides for deductions on donations made to certain funds, charitable institutions, and foundations.
Donations to organizations recognized under 80G are eligible for deduction from taxable income.
The deduction may be 100% or 50%, with or without restriction, depending on the nature of the organization and the purpose of the donation.
For example:
If CAN Foundation has 80G certification allowing 100% deduction, a donation of ₹1,00,000 means ₹1,00,000 can be deducted from the donor’s gross total income.
This effectively reduces the donor’s taxable income, resulting in tax savings.
Conditions for Granting 80G Certification
The organization must be registered under the Societies Registration Act, 1860, or as a Trust under the Indian Trusts Act, 1882.
The foundation must be engaged in charitable activities (education, relief of poverty, medical relief, etc.).
The Income Tax Department verifies genuine work and financial discipline.
The organization must file regular returns and comply with audit requirements.
Relevant Case Laws on Tax Exemption of Donations
1. CIT v. St. Catherine’s Hospital Society (1998) 229 ITR 252 (SC)
The Supreme Court held that donations to charitable institutions registered under Section 80G should be allowed as deductions unless the institution is engaged in activities outside the charitable purposes.
Emphasized that the charitable institution must maintain transparency and proper accounts.
2. CIT v. P.B. Acharaya Charitable Trust (2010) 324 ITR 233 (Karnataka HC)
Karnataka High Court held that donations are eligible for 80G deductions only if the trust is genuine, registered, and actively pursuing charitable objectives.
Mere registration is not enough; the activities must be charitable in nature.
3. Ram Balak Singh v. CIT (1993) 204 ITR 109 (Patna HC)
The court observed that tax exemptions are given to encourage donations to genuine charitable trusts.
The donor’s benefit arises only when the organization is approved under 80G.
How This Applies to CAN Foundation
Assuming CAN Foundation has been certified under Section 80G, all donations made to it become eligible for deduction under this section.
Donors can claim tax benefits, encouraging philanthropy.
The Foundation is required to comply with the Income Tax Act norms to maintain this status, such as proper accounts, audit, and annual filing.
Important Points for Donors
Donors should ensure the CAN Foundation has a valid 80G certificate.
Donations can be made by cash, cheque, or digital transfer; however, donations above ₹2,000 should be through non-cash mode to claim tax benefits.
The Foundation issues a 80G certificate/receipt that donors must keep for filing income tax returns.
Summary
Donations made to CAN Foundation are tax-free for donors if the Foundation holds a valid 80G certificate under the Income Tax Act.
This means donors get a deduction on the donated amount, reducing taxable income.
The legal basis is Section 80G of the Income Tax Act, backed by judicial pronouncements emphasizing genuine charitable activity and compliance.
Both the Foundation and donors must follow prescribed rules to avail and maintain these benefits.
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