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Protect Your Generosity: A Guide to Safely Donating to Charities in India

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In a world full of challenges, there's something truly heartening: people's willingness to help. Recent data shows that a remarkable 72% of adults worldwide have given back in some way to those in need. This spirit of kindness is deeply rooted in our communities. Take India, for example, where households have generously contributed a staggering ₹ 27 thousand crores to support those facing difficulties, with an overwhelming 98% of these contributions being cash donations. While giving is beautiful, there are tales of deceit lurking in the shadows. There's much to consider, from tax evasion suspicions to fraudulent schemes. This blog offers key insights for safe and effective charitable giving in India and staying vigilant against financial fraud and cybercrimes. 

Before opening your heart and wallet to a charity, ask the following questions to ensure your generosity makes the intended impact!


Is The Charity Registered?

Before committing to support a charity, verify its legitimacy. One reliable method is to check if the charity is registered with recognised organisations such as the  Charities Aid Foundation (CAF), the Council for Advancement of People’s Action and Rural Technology (CAPART), Credibility Alliance or through the NGO Darpan, a government website listing registered NGOs in India, while also flagging any blacklisted entities.

Requesting documentation from the charity confirming its registration status is a prudent step, especially when making significant contributions. Charities may be registered as trusts, groups, or businesses, so asking for documents like a trust deed, Memorandum of Association (MoA), Articles of Association (AoA), or a registration certificate is advisable.


Does the Charity Have Reputable Endorsements or Partnerships?

A charity's credibility often receives a significant boost when it's endorsed or partnered with respected organisations. In India, the significance of such alliances is highlighted by the legal mandate for Corporate Social Responsibility (CSR) spending. According to the 2013 Companies Act, companies covered under section 135 must allocate at least 2% of their net profit from the preceding three years to social welfare activities.

In the fiscal year 2023, Indian companies collectively allocated a substantial sum of ₹15,524 crore towards CSR initiatives, spread across 1,296 NSE-listed companies. This emphasises the growing trend of collaboration between businesses and charitable organisations, highlighting the value of partnerships in advancing social welfare goals.


Is the Charity Transparent About its Financial Records?

In most cases, charities operate responsibly, honestly, and with sound management practices. Transparency is fundamental for a healthy charitable organisation, enabling donors to comprehend how their contributions are utilised, ensuring accountability, and safeguarding against any potential misuse of funds. Donors should have access to audited financial statements, allowing them to easily assess the charity's financial health and integrity.


Is Your Donation Eligible for Tax Deduction?

It's important to consider whether your donation qualifies for tax deduction. Some charities are tax-exempt under Section 80G of the Income Tax Act 1961. Amendments made to Section 80G in 2020 aimed to simplify the verification process for donations received by charitable organisations. According to the revised system, charitable organisations must electronically file a statement of donations in Form 10BD, mandated by Section 80G(5)(viii) and Section 35(1A)(i). Subsequently, they must download the certificate in Form 10BE and provide it to donors.

However, not all donations qualify for a tax deduction, so it's essential to understand the tax rules before giving. For instance, contributions to funds like the PM National Relief Fund, the National Defense Fund, etc typically allow for a full deduction without any limit. However, most private religious and charitable organisations usually qualify for a 50% deduction. Furthermore, donations of food, materials, clothes, medicines, or cash over Rs 2,000 are not eligible for tax deductions under Section 80G.


Can the Charity Prove its Impact?

It's essential to look beyond what the charity is merely ‘doing’ and focus on how its activities make a real difference. Regular ongoing and yearly analysis can offer clear insights into the charity's effectiveness. According to Alisoun Mackenzie, author of the book "Give-to Profit," some Key Performance Indicators that donors can use to assess the impact of charities are:

  • Amount of funds donated or raised

  • Visibility e.g. social media followers

  • Specific changes in the lives of those you aim to help

  • Stories from beneficiaries showing the impact of the charity's activities

  • Impact statistics, such as the number of lives saved, scholarships given, people employed

  • Quotes, testimonials, and feedback from volunteers and beneficiaries about the difference your support has made

  • Messages of thanks from beneficiaries and volunteers


Combatting Financial Fraud and Cybercrimes: Reporting and Resources in India

While most charities accept payments online, in cash, or by cheque, be wary if they insist solely on cash payments. Take the time to verify additional documentation and avoid large cash payments to ensure transparency and accountability. After making your donation, stay engaged. Follow up with the charity to receive updates on how your contribution is making an impact. Amidst the growing threat of financial fraud and cybercrimes, understanding the available reporting channels and resources is the key to staying vigilant.


  • Contact the Department of Telecommunications (DOT): The DOT provides an online portal, Chakshu, for reporting fraudulent calls, SMS, or WhatsApp messages aimed at defrauding telecom users. 


Remember that donors are the lifeline of charities. Stay cautious, but don't let fear stop you from giving. Your generosity can create a meaningful change in the world. Happy Giving!


 
 
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