7 Smart Ways to Maximize Tax Benefits on Donations Under the New Tax Regime

Understanding the New Tax Regime in India

The Union Budget 2025 continues to promote the New Tax Regime deductions introduced in 2020, emphasizing simplicity and lower tax rates without the usual exemptions. Under the updated framework, individual taxpayers can now benefit from revised income tax slabs with increased rebate limits, making it more attractive than the old regime. For example, income up to ₹7 lakh remains tax-free due to the enhanced rebate under Section 87A, and the basic exemption limit has been set at ₹3 lakh.

The tax rates under the new structure are rationalized: 5% for income between ₹3 lakh and ₹ 6 lakh, 10% for ₹6 lakh and ₹ 9 lakh, 15% for ₹9 lakh and ₹ 12 lakh, 20% for ₹12 lakh and ₹ 15 lakh, and 30% for above ₹15 lakh. Unlike the old regime, which permitted various deductions such as HRA, Section 80C, and home loan interest, the new tax regime removes most of these exemptions to simplify compliance. Still, it offers a standard deduction of ₹50,000 for salaried individuals and pensioners.

Budget 2025 further incentivizes the adoption of this framework by declaring it as the default option for all taxpayers. However, individuals still have the freedom to opt for the old regime if it better suits their financial situation. This shift is intended to simplify tax planning, boost consumption, and reduce litigation.

It’s important to note that donation exemption in the new tax regime is limited, unlike the old system where charitable contributions under Section 80G were commonly claimed. Under the new tax regime donation exemption rules, most deductions on charitable giving are not available. Therefore, individuals making donations in the new tax regime should be aware that these may not provide tax relief as they did previously.

This new structure encourages taxpayers to choose clarity and reduced complexity over navigating multiple deductions. However, for those with significant investments in tax-saving instruments or regular philanthropic contributions, the old regime may still offer greater benefits.

Ultimately, the New Tax Regime in Budget 2025 represents a cleaner and more transparent tax framework. To make informed financial and charitable decisions, individuals should carefully evaluate both regimes before submitting their income tax returns.

Donation Deductions: Old Regime vs New Regime

The Old Tax Regime and the New Tax Regime differ greatly in terms of tax savings through donations. Let us dissect it:

Old Tax Regime:

Donations to recognized charitable organizations were eligible for Section 80G deductions under the Old Tax Regime. These deductions allowed individuals to lower their taxable income, resulting in reduced tax liability. Depending on the nature of the donation, either 50% or 100% of the amount could be claimed as a deduction.

For example, if you donated ₹10,000 to a registered non-profit organization eligible for a 100% deduction, your taxable income would be reduced by ₹10,000, effectively lowering your tax burden. This system not only provided a financial incentive but also motivated people to support social causes through charitable giving.

However, this benefit does not apply under the New Tax Regime. The government, in its effort to simplify the tax system, has removed most exemptions and deductions, including those available under Section 80G. This means that donation under 80G in new tax regime is generally not claimable, and such contributions will not reduce your taxable income.

So, can donations be claimed in new tax regime? In most cases, they cannot, unless the government specifically announces an exemption in Budget 2025. If you're wondering, “can we claim donation in new tax regime?” or “are donations exempted in new tax regime?”, the answer is: only if explicitly stated by the government. Otherwise, donations in new tax regime do not qualify for tax deductions.

As such, it’s essential to understand the current framework and plan your finances accordingly, especially if charitable contributions are a regular part of your financial or philanthropic planning.

Selecting the Proper Regime:

For people who often donate, the Old Tax Regime is still a popular option, particularly if their overall deductions (from gifts, insurance, home loans, etc.) are substantial. However, the New Regime with lower tax rates can still be more advantageous for you if you have few deductions to claim.

Comparison Table:

Eligible Donations Under Section 80G

Taxpayers may deduct donations given to specific authorized charitable organizations and funds under Section 80G of the Income Tax Act. This is one of the most well-known tax-saving choices for individuals who wish to reduce their tax liability and contribute to charitable causes. However, not all donations are covered by this clause. Contributions are only accepted to certain government-approved groups. To claim this benefit, individuals often need to submit a valid tax write off form for donations. It's also important to note that while this deduction applies under the old tax system, donations under new tax regime are generally not eligible, unless a specific new tax regime donation exemption is announced by the government.

Section 80G donations fall into two primary categories:

1. 100% Dedication Without Limit: This includes contributions to Swachh Bharat Kosh, the National Defense Fund, and the Prime Minister's National Relief Fund. There is no cap on how much of the donation you can claim.
2. 50% Off With or Without Limit: Contributions to specific charitable trusts or NGOs typically come under this category. A maximum of 10% of your gross total income may be applied to some.

Donating to organizations that are registered and authorized under Section 80G is crucial. These organizations typically provide a receipt that includes your name, PAN, the amount donated, and their 80G registration number. To claim the deduction, you must have this receipt.

Keep in mind that donations of cash above ₹2,000 are not deductible. Therefore, to guarantee that your donation is recognized for tax purposes, it is always preferable to make a donation using digital means such as bank transfers, checks, or UPI.

Making wiser contributions and optimizing your tax savings requires knowing which gifts are allowed under 80G.

Types of Donations That Qualify for Tax Benefits

Donations must fulfill specific requirements established by the Income Tax Department to be eligible for tax benefits under Section 80G. Only some kinds of contributions made to authorized organizations or funds are regarded as being eligible for tax deductions; not all donations are.

The primary donation categories that are eligible are as follows:

Contributions to Relief Funds Approved by the Government. 

These consist of the Clean Ganga Fund, the Chief Minister's Relief Fund, and the Prime Minister's National Relief Fund. Donations to these typically qualify for a 100% tax deduction with no upper limit on income.

Contributions to NGOs and Registered Charitable Trusts

Depending on their classification, contributions to non-governmental organizations (NGOs) registered under Section 80G may qualify for a 50% or 100% deduction. NGOs engaged in rural development, healthcare, and education are a few examples.

Contributions to Rural Development or Scientific Research

When authorized, these also aid in tax reduction, but they are also eligible under other sections such as 35AC or 35(1)(ii).

Donations in Kind (Not Eligible)

Even if they are beneficial, donations of food, clothing, medications, or services are not eligible for tax breaks. Only financial contributions made through digital channels—such as net banking, checks, or UPI—are taken into account.

Contributions to Electoral Trusts or Political Parties

Although they are not covered by Section 80G, individuals and businesses may deduct them under Sections 80GGC and 80GGB, respectively.

Always verify the organization's 80G status and obtain an appropriate receipt to make sure your donation is eligible. Being knowledgeable enables you to take advantage of legitimate tax deductions and give liberally.

How the New Regime Affects 80G Deductions

By providing reduced tax rates, the 2020 New Tax Regime seeks to streamline the tax system. But there is a big catch: if you select the New Regime, you will not be able to take advantage of the majority of exemptions and deductions, including those under Section 80G.

Donations to qualified organizations were eligible for tax deductions under the Old Tax Regime. Your tax payment was lowered as a result of these deductions, which also decreased your taxable income. Your taxable income would be lowered by ₹10,000, for instance, if you gave ₹10,000 to a charity that qualified for a 100% deduction.

However, this benefit is not available to you if you choose the New Tax Regime. This implies that you would not receive a Section 80G tax deduction for a donation of ₹10,000. The new system eliminates the tax benefits for donations, but the government hopes it will provide a simpler approach with less calculations and paperwork.

People who frequently donate to NGOs or charity groups are impacted by this trend. They may still have good intentions, but they no longer have the tax-saving incentive to donate.

You could be better off continuing with the Old Tax Regime, though, if donations play a big role in your tax-saving plan. You can continue to use Section 80G and other deductions, such as 80C and 80D.

Compare the two regimes and determine which one gives greater savings based on your donations and other deductions before you file your taxes.

Strategies to Optimize Donations for Tax Savings

If you're looking to maximize your tax savings through donations, there are several strategies to consider, especially if you're opting for the Old Tax Regime. Here are some key tips to help you get the most out of your charitable contributions:

1. Donate to Eligible Organizations
    The first step is ensuring your donations go to charitable organizations that are 80G registered. Not all charities qualify, so always verify their registration status before donating. This will ensure that your donation is eligible for tax deductions.
2. Maximize 100% Deductions
    If you donate to organizations that are eligible for 100% deductions, like the Prime Minister’s National Relief Fund or National Defence Fund, you can claim the entire amount as a deduction. This can significantly reduce your taxable income.
3. Make Donations in Kind (Where Applicable)
    While cash donations are typically eligible for deductions, in-kind donations such as food, clothes, or medical supplies are not eligible for tax benefits. However, some organizations may still accept goods as donations. In such cases, the value of the donation must be accurately assessed, and you can keep track of it for potential future deductions.
4. Use Digital Payment Methods
    To ensure that your donation qualifies for tax benefits, always pay via cheque, bank transfer, or digital payment systems like UPI. Donations made in cash above ₹2,000 are not eligible for deductions.
5. Plan Your Donations Early
    It's a good idea to make donations throughout the year rather than waiting until the end. This allows you to strategically plan your charitable contributions in line with your overall tax planning.
6. Keep Detailed Records
    Always keep a record of all your donations, including receipts and acknowledgment letters from the charity. The tax authorities may require these documents for verification when you claim your deductions.
   
   

By following these strategies, you can increase the impact of your donations while maximizing the tax benefits available to you under the Old Tax Regime.

Required Documentation for Claiming Tax Benefits

When it comes to claiming tax benefits for donations under Section 80G, proper documentation is essential. Without the right paperwork, your claim for a tax deduction may be rejected. Here’s a list of the documents you need to ensure your donation is eligible for tax benefits:

1. Receipt from the Charitable Organization
    The most important document you need is the receipt from the charity or NGO where you donated. The receipt should mention:
   • The name of the charity or NGO.
   • The donation amount.
   • The date of donation.
   • The 80G registration number of the organization.
   • Whether the donation is eligible for a 100% or 50% deduction (depending on the organization).
2. Proof of Payment
    For donations made by cheque, bank transfer, or online payment, make sure to retain the payment proof (e.g., a bank statement, cheque copy, or UPI transaction receipt). This is essential to verify the legitimacy of the donation.
3. Donations Above ₹2,000
    Donations made in cash above ₹2,000 do not qualify for tax deductions under Section 80G. For donations in cash under ₹2,000, a receipt from the charity should suffice, but for larger cash donations, digital payment methods are recommended to ensure eligibility.
4. PAN and Address of the Donor
    Many NGOs request the PAN number and address of the donor, especially for large donations. This helps them issue the correct receipts and ensures the deduction is properly claimed.
5. Annual Tax Receipt (for Ongoing Donations)
    If you make regular contributions, some NGOs issue annual tax receipts summarizing all the donations made during the year. This can help streamline your tax filing process.

By keeping all the necessary documentation, you can easily claim the deductions and ensure that your donations contribute to reducing your tax liability while supporting meaningful causes.

Common Mistakes to Avoid While Donating

While donating to a cause is a great way to contribute to society, there are certain mistakes people often make that can prevent them from fully benefiting from tax deductions. Here are some common errors to avoid when making donations:

1. Donating to Non-Eligible Charities
    One of the most common mistakes is donating to organizations that are not 80G registered. Donations to such organizations do not qualify for tax benefits. Always verify that the charity is listed under Section 80G and has a valid registration number. Most reputable charities will provide this information.
2. Donating Large Amounts in Cash
    Donations made in cash over ₹2,000 are not eligible for tax deductions. Many people unknowingly donate large sums of money in cash, missing out on the chance to claim deductions. It’s always better to make donations through cheques, bank transfers, or online payments for proper documentation and tax eligibility.
3. Not Keeping Proper Records
    Failing to keep receipts or proof of payment can result in difficulties when claiming deductions. Always keep the acknowledgment receipts, bank statements, or transaction receipts as proof of your donations. These records are essential for filing your taxes and for audits by the tax authorities.
4. Not Being Aware of the Deduction Limits
    Donations to some organizations are eligible for 50% deductions, while others qualify for 100% deductions. It’s crucial to understand which organizations fall under each category and the limits on the total amount you can claim. Don’t forget to check if the organization specifies any caps on deductions, especially if you’re donating a large amount.
5. Missing the Deadline for Donation Receipts
    Charitable organizations must provide receipts for donations within the financial year. Make sure to request your receipt on time. Delayed or missing receipts can lead to issues while filing taxes.
6. Ignoring the Documentation Requirements
    If the charity requests additional documents, such as your PAN number or address, make sure to provide them promptly. Not having the proper documentation can delay the process and prevent you from claiming deductions.

By avoiding these common mistakes, you can ensure that your charitable contributions are fully utilized for tax-saving purposes and that your generosity is rewarded.

Examples of NGOs Eligible for 80G Benefits

Many organizations in India are registered under Section 80G, which means that donations made to them are eligible for tax deductions. These NGOs work in a variety of fields, including education, healthcare, rural development, and more. Here are a few examples of NGOs eligible for 80G benefits:

1. Care India Welfare Trust
   Care India Welfare Trust focuses on empowering vulnerable communities in India, particularly through healthcare, education, and women’s empowerment programs. Donations to Care India are eligible for 100% tax deductions under Section 80G, making it a highly effective way to contribute to sustainable social development while benefiting from tax savings. Whether you’re supporting healthcare initiatives or helping improve the quality of education for underprivileged children, your contribution to Care India Welfare Trust is a powerful way to make a difference.
2. Goonj
   Goonj is a well-known NGO that focuses on rural development, disaster relief, and clothing for the underprivileged. Donations to Goonj are eligible for 50% deductions under Section 80G, provided they issue an appropriate receipt. Goonj’s work in rural India, especially with waste material recycling and basic needs fulfillment, has earned it wide recognition.
3. CRY (Child Rights and You)
    CRY works for the rights of children, including providing them with access to education, nutrition, and healthcare. Donations to CRY qualify for tax benefits under Section 80G. It’s a great option if you’re looking to support child welfare and empowerment projects.
4. Teach for India
   Teach for India focuses on education for underprivileged children, aiming to provide quality education in low-income communities. Contributions to this organization are eligible for tax deductions, making it a popular choice for donors who want to support the education sector.
5. The Akshaya Patra Foundation
   Akshaya Patra provides mid-day meals to schoolchildren across India, promoting education and nutrition. Donations to this organization are eligible for 100% tax deductions, especially because it is recognized under Section 80G.

These are just a few examples of organizations you can support to not only contribute to meaningful causes but also enjoy tax deductions under Section 80G. Always ensure that the organization provides you with the correct receipt containing the 80G registration number for tax purposes.

Final Thoughts on Smart Giving Under the New Tax Regime

Donating to charities is not just a way to support meaningful causes; it can also be an effective method to save on taxes, especially under the Old Tax Regime. While the New Tax Regime eliminates deductions like those under Section 80G, you can still benefit greatly by choosing the right charitable organizations and making informed decisions about your donation under tax exemption.

Organizations like Care India Welfare Trust are excellent options for individuals looking to make a difference while benefiting from tax deductions. Care India works towards improving the lives of underprivileged communities, especially focusing on healthcare, education, and women empowerment. Donations made to Care India Welfare Trust are eligible for tax benefits under Section 80G, which can help reduce your taxable income. In fact, certain donations offer 100% tax exemption, depending on government approval, making it one of the most efficient ways to contribute to society while enjoying a donation tax benefit in India.

When donating, make sure to:

• Verify the 80G registration of the charity.
• Opt for digital payments to ensure eligibility.
• Keep all receipts and documentation.
• Plan your donations strategically to maximize your tax benefits.

In conclusion, giving wisely under the new tax framework requires understanding the available deductions and choosing the right organizations. By supporting causes that align with your values, you not only help those in need but also benefit from the tax incentives that encourage such contributions.

FAQ

Which Tax Regime is Better?

 The better tax regime depends on your income and savings. Choose the old regime if you claim many deductions; choose the new regime for lower rates and simpler filing. 

What is the Difference Between Old and New Tax Regimes?

The old tax regime offers many deductions and exemptions, while the new tax regime has lower tax rates but fewer deductions, making it simpler but less flexible for saving taxes.