ITR: Do War Donations Qualify For Income Tax Benefits?

Tensions between India and Pakistan have escalated overnight with India intercepting missiles and drones aimed at key military sites in multiple regions by Pak on May 8.

While officials and forces have urged citizens to not panic, the current situation in the country adds to similar and worse ongoing crises due to geopolitical issues across the world.

Amid this, many people might be wondering whether donations towards war relief and humanitarian aid qualify for tax benefits. While such contributions stem from noble intentions, their eligibility for deductions under the Income Tax Act, 1961, may vary depending on the organisation or the fund receiving the donations.  

Let’s understand the tax implications of a donation to a government fund or armed forces welfare body during wartime.

Under Section 80G of the Income Tax Act, donations made to specified charitable institutions and organisations are eligible for tax deductions. These deductions can be claimed while filing your Income Tax Return (ITR) and reduce your taxable income, thus lowering the amount of tax payable. But there are some specific conditions to keep in mind when claiming these deductions.

Donations to charitable organisations involved in relief work, including those providing aid to victims of natural disasters or war, are eligible for tax deductions. However, the organisation must be a registered charity under the Income Tax Act and the donations must be directed towards a legitimate cause. This includes providing medical aid, food and shelter to those affected by the conflict or war.

For donations to qualify for tax benefits, the key factor is that they must be made to a registered trust or NGO (Non-Governmental Organisation). The donation must be specifically designated for relief work, such as funding medical treatment for war victims or providing supplies to affected areas. If the donation is made directly to the government or a specific government-authorised entity for war-related purposes, the eligibility for tax benefits may differ.

Contributions made to the National Defence Fund, established by the Central Government, are eligible for a 100% tax deduction without any qualifying limit under Section 80G of the Income Tax Act. This means donors can claim the entire amount donated as a deduction from their taxable income, offering both a way to support the country’s defence efforts and reduce tax liability.

Donations made to the Prime Minister’s National Relief Fund (PMNRF) are eligible for tax deductions under Section 80G. These funds are used for emergency relief, including war-related humanitarian aid, and are considered to be eligible for deductions under the Income Tax Act. It’s important to note that for such donations, taxpayers can claim a 100% deduction on the donated amount.

• Eligibility: To claim a deduction, the recipient organisation must be a registered charity under Section 80G. The organisation must provide a receipt acknowledging the donation, which will be required when filing your ITR.

• Documentation: It is essential to obtain official receipts for the donation made, which should clearly specify the amount, the recipient organisation, and the date of the contribution. Without proper documentation, claiming tax benefits could be difficult.

• Limitations: While 100% deductions are allowed for certain funds, other donations may have a ceiling on the deductible amount. For instance, donations to some charitable institutions may allow only 50% of the donated amount to be claimed as a deduction.

While such charitable acts are commendable, it’s important for taxpayers to ensure that the donations are directed to eligible organisations in order to qualify for tax benefits.

It’s advisable to always verify the legitimacy of the recipient organisation, ensure proper documentation and consult a tax professional if necessary to maximise your tax deductions.