New tax regime may impact charity donations owing to higher exemption limit

Income Tax

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Feb 11, 2023

The announcement of higher exemptions under the new tax regime in Budget 2023 is likely to reduce retail donations to charities.

Based on the government’s expectations, nearly two-thirds of taxpayers are expected to opt for the new tax regime, which has now become the default option. The increased rebate limit could discourage people from making charitable donations, said organisations working closely with NGOs.

Many young people joining the workforce are informed about various instruments as a result of tax exemptions — like ELSS, life insurance and health insurance. Charitable donations are similar in nature. The youth become aware of charitable donations not only as a way to save tax but also impact society and make a difference and thus, over a period of time, become more engaged with causes. By making the new tax regime (without exemptions) the default one, the government will snatch these valuable learnings from those just entering the workforce  

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