MUMBAI, JAN 31: The Central government has announced 100 per cent Income Tax exemption on donations made towards relief efforts in the wake of the earthquake in Gujarat.While specifying that donations must be made before June 30, 2001 to charitable organisations to be eligible for exemption, the government has also said that donations to the Prime Minister's National Relief Fund and the Chief Minister's Relief Fund of any state are already entitled to 100 per cent tax exemption. While the exemption means a lot to corporates (maximum tax 38.5 per cent), for the salaried class, an easy calculation is as follows: An employee with a salary slab of Rs 1.5 lakh is entitled to standard deduction of Rs 25,000. If he were to donate Rs 5,000 towards Gujarat relief, taxable income would work out to Rs 1,20,000. Of this, the 20 per cent rate of taxation for the first slab is applicable for an income of Rs 60,000 and onwards. So, the taxable income in the above case would be Rs 60,000. If he has invested Rs 60,000 in government securities which entitles him to rebate under section 88, then he has nil tax liabilty for the financial year 2000-2001. This is apart from the 100 per cent tax exemption on an extra Rs 5,000 standard deduction for women under the age of 65 years. Also, the limit for investment under section 88 is Rs 80,000 if the assessee has invested in infrastructure bonds.
