Anonymous Donation – Section 115BBC of Income Tax Act

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Anonymous Donation – Section 115BBC of Income Tax Act

This article provides a guide to Section 115BBC of the Income-tax Act. The section deals with the taxability of income about Anonymous donations received by the charitable trusts. Often, charitable institutions accept anonymous donations (without maintaining a record of the names and addresses of the donors). Accepting such anonymous donations could result in adverse tax consequences.

Taxation of Donations Received by Charitable Institutions, click here

Definition of Anonymous Donation

The meaning of Anonymous donation has been defined under section 115BBC. Anonymous donation means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person who is receiving such contribution does not maintain any record towards the identity having a name, address, etc.

Section 115BBC of Incometax Act

To prevent the channelization of unaccounted money to Charitable organizations by way of anonymous donations, section 115BBC has been inserted in the Income Tax Act.

As per this section, any income of a wholly charitable trust or institution by way of anonymous donation shall be included in its total income and taxed at the rate of 30 percent.

Taxability of anonymous donations

According to the sub-section (1) of Section 115BBC anonymous donation shall be taxable at the rate of 30% on anonymous donation received more than the higher of the following two amounts;

  • The aggregate anonymous donations exceed Rs 1 lakh
  • 5% of the total donations received

Taxability for wholly religious institutions

Anonymous donations received by wholly religious institutions shall remain exempt from tax.

Taxability for partly religious and partly charitable institutions

In the case of partly religious and partly charitable institutions, anonymous donations directed towards medical or educational institutions run by such entities shall be taxable only to the extent such donations exceed 5 percent of total donations received by such trust or institution or a sum of Rs. 1 lakh, whichever is more. Other donations to partly religious and partly charitable institutions shall remain exempt from taxation.

Taxability for wholly charitable institutions

In the case of wholly charitable institutions, anonymous donations shall be taxable only to the extent such donations exceed 5 percent of total donations received by such trust or institution or a sum of Rs. 1 lakh, whichever is more.

Note: No deduction/ exemption is available even if such donation is fully applied by the institution towards its charitable objects.

Non Applicability of Section 115BBC

Anonymous donation shall not be taxable under the Section 115BBC  in the following cases:

  • If the anonymous donation is received by a wholly religious institution, such donation shall not be taxable under Section 115BBC. Anonymous donations received by wholly religious institutions shall remain exempt from tax.
  • Anonymous donations made to wholly charitable and religious trusts or institutions, i.e. mixed purpose trusts or institutions shall be taxed only if it is for any university or other educational institution or any hospital or other medical institution run by them.
  • Anonymous donation to wholly religious trusts or institutions will not be taxed”
    Any university or other educational institution covered under  Section 10(23C) (iiiab) wholly or substantially financed by the Government is also not covered under Section 115BBC.
  • Section 115BBC does not apply to Any hospital or other institution covered under section 10 (23C) (iiiac) wholly or substantially financed by the Government.

The donee organization must have appropriate detail about the donor at the time of accepting the donation. If, however, the organization has received anonymous donations, then it must ensure that it keeps a tab of the limits under the Income Tax Act.

Know more about Tax Exemption for Charitable Trust

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