Anonymous donations are not defined by cash payments or a donor’s wish for privacy. Under the Income Tax Act, 2025, a donation is anonymous when an NGO does not maintain the donor’s name and address. Even traceable UPI or bank payments can qualify if these details are missing, potentially attracting 30% tax on the amount exceeding the prescribed limit. Proper donor records, including name and address, for every mode of payment can help NGOs avoid unnecessary tax exposure and

In the case of Society for Human Transformation and Research v. Income-tax Officer, the ITAT Delhi addressed exemptions under sections 11 and 12 for a charitable society. The society claimed exemption despite making interest-free advances to certain entities, which the Assessing Officer (AO) challenged as providing undue benefits to specified persons. However, the Tribunal found no material evidence of personal benefits deriving from these advances and confirmed that the enti

Interest on Fixed Deposits Cannot Be Treated as Corpus Without Specific Donor Direction: HC Case: St. Joseph’s Development Trust v. Income-tax Officer (Exemption) ITA Nos.: 124 of 2026 Court: Madras High Court Assessment Year: 2017-18 Date of Order: 17 August 2026 Brief Facts:  The assessee was a public charitable trust registered under section 12AA.  The trust filed its return declaring nil income. During scrutiny, the Assessing Officer noted that the trust had earned fixe

The ITAT Hyderabad held that income accumulation under Section 11(2) is not limited to capital expenditure or long-term projects. Revenue purposes are also eligible if they are specific and aligned with the trust’s objects. In Medak Catholic Mission v. ITO, maintenance of priests, preachers and religious functionaries was found to be a specific purpose covered by the trust’s objects. The ITAT allowed the accumulation and deleted related protective additions for earlier years.

In Joint CIT (OSD) v. S.M. Sehgal Foundation, the Chandigarh ITAT held that a trust’s enabling clause to acquire and manage property cannot be treated as an independent commercial object. Rental income from such property, when wholly applied to charitable purposes, remains eligible for exemption under Sections 11 and 12. The Tribunal also upheld reasonable CEO remuneration, accepted the explanation of third-party donations, and approved reconciled FCRA receipts and tied-grant

Can one registered non-profit organisation (RNPO) pay another RNPO? Yes—but the compliance treatment depends entirely on one question: Is the payment for services or is it a voluntary donation (sub-grant)? While both transactions may appear identical in a bank statement, they have very different tax and regulatory implications. If one RNPO provides a specific service—such as research, training, or programme implementation—the payment is treated as a commercial transaction. I

In the case D.L. Shah Trust v. Deputy CIT, the ITAT ruled that transferring accumulated funds to another charitable institution incurs tax consequences under section 11(3)(d). The trust argued that payments to organizations like QCI and TERI represented direct applications of accumulated income. However, the Tribunal clarified that the Income-tax Act differentiates between current and accumulated income, emphasizing that the lack of exception for implementing agencies means s

In ASCI v. CIT, the Mumbai ITAT ruled that foreign remittances for software subscriptions and international memberships used to support domestic consumer-awareness and regulatory tasks do not violate Section 11(1)(c). Because the ultimate benefit and utilization of these expenses remain within India, they cannot be classified as income applied abroad. Additionally, the Tribunal ordered tax authorities to re-evaluate registration delays using historical Section 80G approvals.

The ITAT Chandigarh ruled that pre-school and kindergarten activities constitute “education” under Section 2(15) of the Income-tax Act, recognizing Early Childhood Care and Education (ECCE) as part of the formal education system. It held that registration under Section 12AB cannot be denied based on alleged Section 13 violations, as such issues must be examined during assessment proceedings. The Tribunal directed the tax authorities to grant charitable registration to the ass

Many NGOs mistakenly treat accumulated funds as corpus, but corpus funds and unrestricted reserves are fundamentally different. Corpus funds arise from donor-specific directions and must follow investment and tax rules, while unrestricted reserves come from organisational surpluses and offer operational flexibility. Correct classification is essential for compliance, reporting, and governance.

In the case of Assistant Commissioner of Income-tax (Exemption) v. Shri Khodal Dham Trust, the ITAT Ahmedabad ruled that a trust's predominant charitable activities could not be deemed non-exempt just due to religious elements. The trust, engaged in education, medical relief, and public welfare, constructed a prayer hall and conducted rituals. The Assessing Officer denied exemptions, citing religious bias. The Tribunal highlighted that activities were open to all, and judicia

The Bombay High Court ruled that the Commissioner’s revision order under Section 263 was invalid as the Assessing Officer conducted a proper enquiry regarding the utilisation of accumulated funds by the charitable institution. The Court noted that the Assessing Officer sought detailed information, and the assessee provided sufficient documentation. Merely suggesting that more enquiry should have been conducted did not justify invoking Section 263. The Court also emphasized th

Outstanding expenses and provisions are crucial distinctions for NGOs, affecting financial statements and governance. Understanding these terms is essential for accurate reporting, especially under accrual accounting, where expenses are recorded when incurred, not when paid.

Gemini said The ITAT Mumbai ruled that Section 12AB registration cannot be denied merely because commercial receipts exceed the 20% threshold under Section 2(15) without assessing their nexus to charitable objects. The Tribunal remanded the case, noting that the Commissioner must first determine if the activities fall under specific charitable limbs or general public utility, and whether such receipts are incidental to the main charitable activities.

The Bombay High Court ruled that missing irrevocability or dissolution clauses in a trust deed are not valid grounds to deny registration under Section 12AB, as public charitable trusts are inherently irrevocable under the MPT Act. Consequently, the court overturned prior rejections and ordered tax authorities to update the online Form 10AB utility to prevent penalizing applicants for technical or procedural limitations.

Many NGOs mistakenly record restricted grants as income when they are actually liabilities. For example, if an NGO receives ₹50 lakhs for a project, it must consider the specific conditions of the grant. Under accrual-based accounting, income is recognized only when earned, meaning funds should only be counted as income as the organization fulfills its obligations. Incorrect treatment inflates surplus, weakens credibility, and misleads boards. Accountants should understand de

The ITAT Bangalore upheld the Kurunji Education Trust's appeal against the rejection of its permanent Section 80G approval by the Commissioner of Income Tax (Exemptions). The Tribunal found the rejection unjustified, emphasizing that concerns over surplus income and fee receipts should not affect approval. The focus should have been on the genuineness of the trust’s activities and compliance with Section 80G(5). Issues regarding fund application are for assessment proceedings

In the ITAT case of Hriday v. ITO, the Tribunal ruled that a sub-grant paid to the University of Texas from a project-specific grant received from NIH for a tobacco cessation research project does not constitute application of income outside India. The remittance was for collaborative purposes and was deemed a diversion of income by overriding title, thereby allowing the organization to maintain its tax exemptions under sections 11 and 12. The Tribunal found no benefits to sp

Cash vs Accrual Accounting is crucial for NGOs as it influences compliance and transparency with donors and regulators. Cash accounting records transactions when cash is received or paid, focusing on current liquidity, while accrual accounting records income when earned and expenses when incurred, offering a more accurate financial picture. Nonprofits face varying legal requirements, such as mandatory accrual accounting under the Companies Act and flexibility under the laws f

Grant accounting is essential for NGOs, focusing on managing donor funds through structured processes that ensure compliance. Unlike traditional accounting, it rigorously checks if funds were used as intended and reported accurately. Key steps entail setting up grants as cost centres, tracking budgets, and generating donor reports. This practice strengthens relationships with donors, enhances decision-making, reduces compliance risks, and improves funding opportunities. NGO f