Social Benefits of Tax Exemption

Donating to a cause is noble, and the tax departments of many nations also recognise it!

Tax exemption is a financial relief provided to individuals or organisations from paying a portion or all of their taxes. In many countries, the law mandates tax exemptions on charitable contributions to encourage people and businesses to donate a part of their earnings for the welfare of underprivileged communities.

In India, Section 80G and 80GGA of the Income Tax Act of 1961 allow an individual to claim deductions on donations made to NGOs that are registered under the Act. The taxpayer can receive either a 50% or a 100% deduction on tax based on the non-profit entity they donate to.

Tax exemptions also offer many noteworthy social benefits by promoting economic growth, social welfare, community building and charitable giving.

1. Supports economic growth

Tax exemptions can motivate individuals and businesses to invest in certain industries or activities, such as renewable energy, research and development or affordable housing. It can boost innovation and growth, eventually leading to job creation, higher wages and improved living standards.

It can also result in increased tax revenue in the long run. For example, tax exemptions for renewable energy can help reduce energy production costs, leading to lower energy prices and higher economic activity. This, in turn, can yield greater tax revenue from other sources, such as sales and income taxes.

2. Promotes social welfare and social justice

Tax exemption can also promote social welfare and social justice by providing relief to those in need. For example, when governments offer tax benefits to individuals with disabilities or low-income backgrounds, they can meet their basic needs, such as food, housing and healthcare. It will also help alleviate the financial strain on family raising individuals with special needs.

In India, Section 80U of the Income Tax Act of 1961 offers tax benefits to differently-abled individuals, while Section 80DD aids those who support family members with special needs.

Consequently, these deductions can significantly help reduce poverty, promote social mobility, guarantee a more equitable society and improve the quality of life for lesser privileged communities.

3. Helps build communities

Tax exemption can promote social cohesion by encouraging the formation of community-based organisations around shared interests, such as environmental protection, cultural preservation or advocacy for marginalised groups. It can be an efficient way for governments to boost social cohesion and civic engagement, resulting in a more connected and resilient society.

4. Promotes charitable giving

One of the most common social benefits of tax exemption is the promotion of charitable giving. Charitable organisations are often tax-exempt, which means that they do not have to pay taxes on the donations they receive. This encourages individuals and businesses to donate more to these organisations, as they can receive tax deductions for their contributions. This, in turn, leads to increased funding for social causes such as education, health and poverty alleviation.

The Akshaya Patra Foundation is one such not-for-profit organisation in India that has been the implementing partner of the Central Government’s PM Poshan Abhiyaan (earlier called the Mid-Day Meal or MDM Programme) for 22 years. It serves hot, tasty, safe and nutritious meals to over 2 million children in 22,367 schools every day.

These mid-day meals (MDM) include a balanced diet of rice, lentils, vegetables and fruits. This ensures that the beneficiaries receive essential nutrients and build a strong foundation for their long-term health and development.

Over the years, Akshaya Patra has effectively facilitated children's access to education, particularly for those from challenging socioeconomic backgrounds. Through mid-day meals and other initiatives, the NGO has helped improve children's attendance and academic performance in schools, ultimately contributing to a brighter future for them and India as a whole.

Support Akshaya Patra and avail tax benefits

Tax exemption can provide significant social benefits by stimulating charitable giving, economic prosperity, social welfare, social cohesion and social justice. However, tax exemption policies must be designed in a way that is fair, equitable and sustainable, and does not disproportionately benefit certain groups at the expense of others.

If you feel inspired to bring a positive change in society with your tax-exempt contributions, consider donating to an NGO. You can browse through a list of programmes on their website, choose a cause you feel drawn to and contribute online to give the beneficiaries better opportunities for growth.

For instance, when you support Akshaya Patra’s initiatives for school children, nursing mothers or elderly women without families, not only do you gift them hope with nutritious meals, but also benefit yourself by receiving a 50% tax exemption on every donation you make.

So, invest in a cause close to your heart with a few clicks and help transform the lives of people who need support.

Contribute today!

The Akshaya Patra Foundation is an Indian Ngo implementing the Mid-Day Meal Programme. Your support to Akshaya Patra can potentially improve lives of millions of children across India and also avail you tax exemption.