Here's everything about tax deductions for green contributions in India
What's the story
To foster a culture of environmental preservation, the Indian government provides several tax benefits for donations made toward eco-friendly initiatives.
Grasping these incentives can benefit both individuals and corporations by reducing their tax liabilities, while simultaneously contributing to a cleaner, greener environment.
This article delves into the crucial sections of the Income Tax Act that grant these deductions.
Charitable contributions
Deduction under Section 80G
Donations made to specified, government-approved environmental organizations or entities qualify for tax deductions under Section 80G of the Income Tax Act.
The deduction can range from 50% to 100% of the donated amount, depending on the specific entity you donate to.
Before making a donation, verify that the organization is registered and approved under this section to avail the benefit.
Investment in eco-projects
Benefit under Section 35AC
Section 35AC of the Income Tax Act provides a deduction for contributions made to projects and schemes considered nationally significant, including those aimed at environmental conservation.
Companies that donate to these government-approved projects can claim a deduction of 100% of the donation amount.
This provision is intended to incentivize corporate involvement in environmental preservation and improvement.
Green investments
Exemption under Section 80C
Investments in green bonds or sustainable funds that contribute to environmentally-friendly projects or companies can also avail deductions under Section 80C of the Income Tax Act.
This section pertains to investments and savings, allowing a deduction of up to ₹150,000 per annum from the total gross income.
Although not explicitly tied to environmental contributions, such investments align with the broader goal of supporting sustainable initiatives.
Corporate Social Responsibility
Advantage through CSR spending
By law, companies in India are required to allocate a percentage of their profits to Corporate Social Responsibility (CSR) initiatives, which often include environmental conservation projects.
Although this expenditure does not provide a direct tax deduction, it allows companies to lower their taxable income by diverting profits to CSR initiatives, including green projects.
Strategic giving
Planning your contributions wisely
When making donations or investments toward environmental causes for tax deductions, always keep well-organized records and retain all receipts.
Verify that the organizations receiving your contributions are registered under the relevant sections of the Income Tax Act mentioned above.
Seek advice from a tax advisor to gain a clear understanding of how to maximize benefits while contributing to ecological sustainability.