Donating money before March? Here’s all you need to know

March well underway and amid the last minute filings, a lot of us are considering donating to a cause we care about – as it also helps reduce our taxable income.

We decided to sit down and have a chat with Siddharth Saraf, Co-founder of Opulus – a financial services company, to clear up some common misconceptions about tax deductible donations and get some expert advice on saving.


What assumptions do most people make about tax benefits while donating? Do you think people are aware of the tax benefits when they give?

Most people, especially younger working professionals, generally have a sense of giving back to society. So yes, they do donate, but it’s usually to larger institutions like Cry or HelpAge India. Apart from this, India being a religious country – we see a lot of donations going towards religious bodies.


What should people look for before donating to an organisation?

The thing that’s topmost on people’s minds is whether the money is being used for a good cause. They want to know if their money is benefiting the final beneficiary.  In one word – transparency.


What are some general trends you’ve noticed in your client’s donation behaviour? Do people usually only donate before the tax deadline or are they more planned?  

People generally donate before the tax deadline, yes. But we’ve noticed that contrary to popular belief, most people don’t view donations as an instrument to plan their taxes. The underlying drive to donate stems usually from reasons that aren’t tax saving specifically.


Is it only HNIs that donate or do most clients give to some cause?

HNIs do donate a lot, yes. But we have also seen numerous clients who are capable, but not HNIs, who have the drive to support a cause of their liking. The only issue they face is that a number of popular charities make donating convenient, but are not as transparent about the usage of funds as they would like.


What are the most common mistakes or assumptions people make while donating to charities?

Many do not understand what level of tax savings they would get once they donate to a charitable organisation. Some organisations offer a 100% tax rebate, while others offer only 50%. It’s important to know what your charitable organisation offers.

Another mistake people make is not noting down the PAN number, registration number and important details of the organisation. It is very important to state the PAN number of the organisation that one is donating to, to claim tax benefits.


What in your experience has motivated people to give? Is it really just about getting a tax refund ?

No, it’s not really just about the tax. We’ve seen an increasing trend in people wanting to donate for a good cause. In my opinion, systematic donation plans, just like systematic investment plans would also make a number of lives easier, as donors would be able to support their foundation, without taking a major hit on their cash flow at the end of the year.       


What advice do you usually give your clients about savings and tax benefits?

We always advise our clients to save at least 25-35% of their take home salary in financial instruments that can deliver returns that are in excess of the existing inflation rate, in order to extend the longevity of their savings and wealth.  


Do you notice a lot of people giving and not declaring this amount for tax deduction? If so, why do you think this happens? What could be done to make the process clearer to people who care about the causes they support?     

Yes, we do notice it because people collect their donation receipts in hard copies and unfortunately misplace them while filing their taxes. We definitely should ensure that the donation receipts go out in soft copies in a mode that is more convenient and accessible to the donor as a change in process. Charitable organisations should also clearly display their PAN and other registration numbers on their website which will mitigate these issues.


Does your company advise clients to donate?

Of course, we do advise our clients to donate. Giving something back to society along with rightfully paying taxes is one of the principles that we follow while advising our clients on tax and investments. We believe that donating to charitable organisations, as per the clients’ capability, is a good use of their wealth and financial resources.


Siddharth is a chartered accountant who has been in finance and accounting for the past 4 years. He began his career with Nereus, a private equity firm, but branched out independently soon after. In 2016, he co-founded Opulus, which provides Virtual CFO services to entrepreneurs interested in completely outsourcing their finance departments. Along with VCFO services, he also contributes to Happynessfactory, a personal financing platform that advises young professionals on investments and savings.