The Finance Bill has introduced tax relief at the marginal rate on individual contributions to charities of at least £250 (€318).

The proposals provide for more tax-effective donations to charities from individuals and the commercial sector.

There will be no upper limit on the total amount of relief afforded to individuals or companies. Relief will be available on donations to all charities, including third-world charities, and to first- and second-level schools, and third-level institutions.

The Irish Charities Tax Reform Group said the move had the potential to generate millions of pounds in additional revenue for the sector.

"We believe this initiative will encourage the people and businesses who are benefiting from the Celtic tiger to help those in greater need while also capitalising on the tax benefits," its chairperson, Ms Deirdre Mortell, said.

The move was also welcomed by individual charities.

The Beaumont Foundation, the fund-raising arm of Beaumont Hospital, said the measure would encourage greater public support for the work of charities while Barnardos, the Republic's largest children's charity, said a £250 donation by a higher-rate taxpayer would become £431.03 because of the more favourable tax treatment.

For ease of administration, tax relief for most taxpayers will be paid by the Revenue Commissioners to the body receiving the donation rather than to the donor, while individuals on self-assessment will claim the relief and companies will make the deductions as if the donation were a trading expense.