Several crowdfunding organisations are pooling donations to help those facing a financial crisis as the country grapples with the second wave of covid-19. However, the recipient should know that extended financial help may have tax implications.
“A donation will be considered a gift in the hands of the recipient and will be tax-free up to ₹50,000 but if it is more than ₹50,000 then the entire amount becomes taxable," said Prakash Hegde, a Bengaluru-based chartered accountant.
If the total taxable income of the taxpayer is above the basic exemption limit then the amount received as help or donation will be added to the income of the recipient and will be taxed as per the slab.
However, there are certain exemptions to the rule that you should know about:
- In case the charitable organisation is registered with the Income Tax Department, the donations received will not be taxable even if they are above ₹50,000 limit. To know the tax implications you can check if the organisation is registered with the tax department or not.
- The taxability will also depend on the type of donation as well as the mode of donation. Donations received become taxable in case it is above ₹50,000 and is a sum of money or immovable property or certain types of properties including shares, securities, jewellery, work of art, bullion etc. There are nine such properties listed in the tax law. If the donation is made in any other kind of property other than these then it will not be taxable. For example, if someone has received an oxygen concentrator as a donation, it will not be taxable.
- “If a person’s hospital bill is paid directly by such a charitable organisation or any other person, the same will not be taxable as it is not a sum of money or property mentioned in the tax law; however, if the money is transferred to the beneficiary's account, then it will become taxable in the hands of the recipient," said Hedge.
- If the employee receives any help from the employer then there will be no tax exemption, the entire amount will become taxable.
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