Thinking of donating to a foreign charity? Check the tax side first
Giving to a well-known foreign charity, such as a national Red Cross society, is generous and often straightforward from a practical point of view. But if you live in India, there are a few tax and compliance points to consider before you click “send.”
Is the remittance covered by the Liberalised Remittance Scheme (LRS)?
As a resident individual you must route personal outward remittances — including gifts and donations — through the Reserve Bank’s Liberalised Remittance Scheme. The LRS has an annual cap per individual, and banks will process the transfer against that limit. Ask your bank about any document checklist they require for a donation.
TCS (Tax Collected at Source): banks may collect it
Banks or authorised dealers sometimes collect TCS on certain outward remittances. This is a collection mechanism, not a final tax. The exact applicability and rate can change, so confirm with your bank before remitting. If TCS is collected, retain the receipts — you can often claim it as a credit when you file income tax returns.
TDS and DTAA: when they matter
- TDS in India: Generally, donors in India do not face TDS on a donation — TDS rules usually target payments that constitute taxable income. Still, if the payment has some element that is treated as income or benefit, consult a tax professional.
- Foreign withholding and DTAA: If the recipient country levies any tax on the transaction or on benefits you receive, the Double Taxation Avoidance Agreement (DTAA) between India and that country may offer relief. Keep records of any foreign tax deducted and obtain certificates to claim credit under Indian law if applicable.
Are donations to a foreign charity tax-deductible in India?
Most Indian tax deductions for donations (for example, under Section 80G) apply only to specified Indian funds and approved institutions. Donations to foreign charities typically do not qualify for Indian income-tax deductions. If tax deduction is important to you, consider donating through an approved Indian intermediary or check whether any special provisions apply for the specific recipient.
Practical checklist before you donate
- Confirm the remittance falls under your LRS entitlement and check the remaining limit.
- Ask the bank about TCS and any forms they will collect or report.
- Request a formal receipt or donation certificate from the foreign charity showing purpose and amount.
- Check whether Form 15CA/15CB or other tax forms are needed for the transfer — banks often guide on this.
- If there’s any foreign tax withholding, obtain documentation to claim DTAA relief or foreign tax credit.
- Consult a chartered accountant or tax advisor if the amount is large or if you expect complex cross‑border tax consequences.
Donating across borders is noble but comes with paperwork. A quick call to your bank and a short tax consult will help you avoid surprises and ensure your donation reaches its intended purpose smoothly.