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Make donations work like your systematic plans

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October 01, 2014
Tania Kishore Jaleel | Vivina Vishwanathan

Make donations work like your systematic plans

lm-make-donations-work-like-your-systematic-plansDon’t let the thought of inadequate funds deter you

Philanthropy is almost the only virtue which is sufficiently appreciated by mankind,” said American poet and author, Henry David Thoreau.

The DaanUtsav, or the Joy of Giving Week, starts today (2 October) and goes on till 8 October, and coincides with the festival season. Though charity need not be restricted to festivals or DaanUtsav, it’s a good enough reason.

Don’t let the thought of inadequate funds deter you. Anil Agarwal, founder, Vedanta Resources Plc, may have said that he and his family will donate 75% of their wealth to charity. But you don’t have to be wealthy to donate.

Reeni Edward Kennedy, 43, a Navi Mumbai-based homemaker, has been working for various causes. “I follow the principle—we make a living by what we get, but we make a life by what we give. As a Christian, I believe it is my moral responsibility to give what I receive. I try and help widows, and especially their children, to complete their education,” she said.

Thirty-five-year-old Cochin-based online content editor Sarah Cherian has her regular monthly expenses of loan instalments, school fees, groceries, fuel and the like to take care of. And yet she, and her husband Jacob Cherian, donate Rs.10,000-15,000 to non-government organizations (NGOs) every month. Jacob works in the UK with an information technology firm, and sends his contributions directly to the NGO via Net banking.

One of their recipients is an orphanage at a church in Sarah’s neighbourhood. “Every month, the orphanage takes donations from various people and arranges a big dinner for the children. I am able to play a small part in making these children have a meal worthy of a king,” she said.

Helping children and the elderly is, in fact, a cause close to the hearts of many Indians. “Our experience and research has indicated that Indian donors are particularly concerned about children and the elderly. For the younger donors (below 30 years), environment related causes are becoming important, but given the growing number of volunteers we have today, it is apparent that children’s condition is clearly an area they want to make an impact in,” said Anita Bala Sharad, director, resource mobilization, CRY-Child Rights and You.

This is true at other NGOs as well. Dhaval Udani, chief executive officer, GiveIndia, said, “The maximum number of donations are made towards education (34%) followed by causes of children (23%), the disabled (12%) and health (11%).”

End to end

Donations are like any other money transaction; you have to do your homework. There are hundreds of NGOs and trusts in India; how do you know which are genuine? “I do my background checks. Only if I am convinced do I donate. But 99% I only give to causes that I know of through personal contacts,” said Sarah.

“You should look for details such as history, management and board members to assess the organization’s credibility. Also check for regularly published annual reports and audited statements. Annual reports and financials of at least the past three years on the website is a good indicator,” said Udani.

After choosing the cause you want to donate to, zero in on a few organizations that work in this field. Use different sources such as search engines, media and personal network to build the list, said Sharad.

An important parameter to look at is the NGO’s fund-raising expense. It should ideally be under 20% of the funds raised, and the information should be publicly available. At times, an NGO may have undertaken significant short-term expense to build capacity, scale and operations. “It is important to go through the annual report in detail to understand if the NGO has a high cost structure year-on-year or for a limited period for a specific reason,” said Udani.

Another thing to check for is 12A and 80G certificates. An NGO registered with the income tax department to claim tax exemption for income gets 12A certification. And if it has an 80G certificate as well, then its donors don’t have to pay tax on 50% of the donated amount. “A 100% tax exemption is only given to organizations vetted by the National Committee (set up by the central government),” said Sharad.

A salaried individual can get tax benefit on donations but up to a limit. Under section 80G, you can claim deduction, of 50% or 100%, for donations to certain funds and charitable institutions. Cash donations above Rs.10,000 do not get any tax benefit. So remember to pay by cheque, draft or online. You will have to submit a receipt to get the benefit of deduction. Under section 80GGA, you can get maximum deduction equivalent to the amount donated to approved entities involved in scientific research or rural development. Same goes for money given to political parties or electoral trust under section 80GGB and 80GGC. To avail this deduction, the donation should be made to a political party registered under section 29A of the Representation of the People Act.

Your work doesn’t end with donation. You must follow up to see how your money is being put to use.

Consulting firm Bain and Co. comes out with an India philanthropy report every year. The 2013 report said that 80% of donors (who were surveyed) were satisfied with how their contributions were used. “Donors tend to focus on the changes that their giving creates in the lives of beneficiaries. They seek quantitative metrics, such as number of students enrolled, and audited results of NGOs’ activities to assess impact. Guided by these expectations, NGOs generally work towards easily measured indicators as proof of work,” said the report.

Apart from going through annual reports, you could visit the NGO or trust itself. “I go to the orphanage regularly to get a better sense of what is being done and what else needs to be done,” said Sarah.

So, choose carefully, and then follow up. After all, no one wants her hard-earned money to be misused.