How Tax Exemption Encourages Charitable Donations
Economic incentive to Donors The role of charitable donations in social welfare, education, health and community development has always been a major concern. Tax exemption s however, form one of the greatest incentives to such contributions. Governments provide a win-win scenario by providing financial relief to donors, in which people pay less taxes at the same time contributing to causes that improve society. Both the donor and the nonprofit organization must understand how tax exemptions motivate them to give to charity. In cases wherein individuals/companies donate to a registered charitable organization, they tend to have tax deductions under such provisions as section 80g of the income tax act. This implies that a portion of their contribution is eligible as a deduction of their taxable income and thus lowers the amount of tax they will pay. These incentives also increase the appeal of donations since the donors get more than a social responsibility and will gain monetary benefit...