If you are told that you can save tax of Rs 12,500 by donating just Rs 10, then you might not believe it, but it is true. There is a section 80G in the Income Tax Act, under which you get tax exemption on the money donated.
If you are told that you can save tax of Rs 12,500 by donating just Rs 10, then you might not believe it, but it is true. There is a section 80G in the Income Tax Act, under which you get tax exemption on the money donated. Now you will think how to save tax by donating? Let us explain to you its complete mathematics.
Actually, everyone believes that the one who has a lot of money donates money. However, in reality you can save a lot of money from tax by donating. Let us understand a situation in which if you donate Rs 10, it will help you save tax up to Rs 12,500. Simply put, you will be able to save tax on approximately Rs 2.5 lakh.
How much tax will be charged?
If we 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, every employed person gets the benefit of standard deduction of Rs 50 thousand. After adding these exemptions and deductions, if your total income remains Rs 5.5 lakh or less, then under Section 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 tax. But if your earning is more than Rs 10, then you will not get this rebate of Rs 2.5 lakh.
Save Rs 12,500 by donating Rs 10
If even after taking the standard deduction of Rs 50 thousand, your income remains a little more than Rs 5 lakh, then in such a situation you can avail the benefit of Section 80G of the Income Tax Act. You donate Rs 10 under this. Now when you donate Rs 10 under 80G, there will be no tax on that too, because your taxable income will become Rs 5 lakh. Due to taxable income of Rs 5 lakh, you will get tax exemption of Rs 12,500 and you will not have to pay any tax on it. Even though here we have taken the example of only Rs 10, this amount may be more for you.
Donate 10 thousand, save 13500 rupees
Suppose your total taxable income after standard deduction comes to Rs 5.10 lakh. In this way, you will have to pay tax of Rs 12,500 at the rate of 5 percent on Rs 2.5-5 lakh and Rs 1000 at the rate of 10 percent on the remaining Rs 10,000, i.e. Rs 13,500 in total. In such a situation, if you donate Rs 10 thousand, your taxable income will again become Rs 5 lakh and you will not have to pay any tax. That means by donating Rs 10,000 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 means, to take advantage of this, you will have to start planning for income tax from the beginning of the year. That is, if you want to save tax by donating Rs 10, then start the calculation in advance, so that you can know how much tax is actually going to be levied on you.
