[Opinion] Anonymous Donations All Aspects | Accounting, Record Keeping, Taxation, etc.

CA Naresh Kumar Kabra & Shailly Chordia – [2024] 169 taxmann.com 353 (Article)

When someone makes a donation without revealing their identity, how does the law treat it? Are such contributions entirely private, or do they fall under specific rules to ensure transparency and accountability? In exploring these questions, we gain insight into the legal and financial framework that governs anonymous donations, particularly in the context of charitable and religious trusts, and how these contributions are treated under the law?

Let’s begin by understanding what an anonymous donation actually means?

1. What is Anonymous Donation?

Under the Income Tax Act, 1961 (ITA), an anonymous donation is defined in Sec 115BBC(3) as a voluntary contribution which mentioned in sub-clause (iia) of clause (24) of section 2, where the recipient of the contribution does not keep a record of contributor’s identity, including their name, address, and any other details that may be specified.

Essentially, it means that an anonymous donation is one where the organization receives a contribution but does not track or retain sufficient details about who the donor is.

2. Taxability of Anonymous Donation

Anonymous donations are regulated by Section 115BBC of the Income Tax Act, 1961. The taxation and exemptions for these donations depend on the nature of the receiving trust.
Before examining the taxability aspect, let us first gain an understanding of the various types of trusts.

• Charitable Trusts: Charitable trusts are established with the primary aim of serving social, educational, medical, or other public welfare objectives.
• Religious Trusts: Religious trusts are created for the promotion or practice of religion, including rituals, worship, or maintenance of places of worship.
• Partly Charitable and Partly Religious Trusts: These trusts serve both charitable and religious purposes, such as running schools or hospitals alongside promoting religious activities.

Having understood the different types of trusts, let us now delve into their taxability.

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