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How are donations to religious institutions taxed in India?

The Government of India is interested in promoting contributions and donations from its citizens to various charitable organisations across the country, and as such regularly updates the Income Tax Act to include new programmes or trusts that are set up for charitable purposes. Recognisable examples include the Prime Minister's National Relief Fund, the National Defense Fund, or Jawaharlal Nehru Memorial Fund.

The Government also encourages donations to funds that are set up for the benefit of other countries, such as the Africa (Public Contributions - India) Fund and the Prime Minister’s Armenia Earthquake Relief Fund. According to Section 80G of the Income Tax Act, amounts equal to 50% of the aggregate of the sum donated are deductible when an individual is paying their income tax. 

With regard to donations to religious institutions, there isn’t particularly strong encouragement from the Government in terms of tax benefits. Under Section 80G, it is specified that, “sums paid by the assessee in the previous year as donations for the renovation or repair of any such temple, mosque, gurdwara, church or other place as is notified by the Central Government in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States;” are deductible at 50% of the amount donated.

Beyond this, the Income Tax Act does not specify any other donations or contributions to religious institutions for any purposes as being eligible for exemptions or deductions. In fact, in 2013 the Supreme Court ruled that such donations as mentioned under Section 80G should not be eligible for income tax exemptions as these contributions are of a religious nature, which goes beyond the definition of ‘charity’.

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