[Opinion] Revisiting Section 115BBC – Are Digital Donations Truly Anonymous?

Adv. (Dr.) Manoj Fogla, CA. Suresh Kumar Kejriwal & CA. Tarun Kumar Madaan – [2025] 175 taxmann.com 350 (Article)

Executive Summary

This article critically examines the continued relevance and application of Section 115BBC of the Income-tax Act, 1961 in the context of India’s evolving digital donation landscape. Introduced in 2006 to combat the influx of unaccounted cash through charitable institutions, the provision imposes a 30% tax on “anonymous donations.” However, in 2025, most donations are made through traceable, KYC-compliant digital channels like UPI and bank transfers.

The article highlights the legal paradox where such technologically traceable donations may still be treated as “anonymous” purely due to administrative limitations in recording the donor’s name and address. Through doctrinal principles such as Substance Over Form and Doctrine of Impossibility, supported by key judicial precedents, the paper argues for a policy and interpretive shift. It also considers compliance burdens on NGOs, privacy concerns, and behavioural shifts under the New Tax Regime.

In light of these challenges, it recommends tiered reporting thresholds, digital traceability recognition, and exemption for micro-donations via regulated systems. The article urges a legislative rethink to preserve the integrity of Section 115BBC while aligning it with the realities of modern financial infrastructure and donor behaviour.

1. What is “Anonymous” in the Digital Era?

Historically, anonymity in charitable giving was conceptually simple. Contributions made in cash, particularly through donation boxes placed by charitable institutions, were accepted without the need to identify the donor. This was a norm, not an exception, rooted in tradition and trust.

However, the advent of digitisation has fundamentally transformed the financial ecosystem. In 2025, most financial transactions, from retail payments to philanthropic contributions, are routed through structured digital payment systems such as UPI, net banking, or wallets. Every transaction leaves behind a verifiable digital footprint, including timestamps, account identifiers, and traceable references.

Yet a critical question persists in tax jurisprudence and regulatory oversight:

Can a donation, made through a fully traceable banking channel, still be classified as ‘anonymous’ under the prevailing legal framework?

This question becomes even more pertinent when considered in the light of the statutory construct and judicial interpretation of ‘anonymous donations’ under the Income-tax Act, 1961.

2. Origin and Framework of Section 115BBC

The genesis of Section 115BBC can be traced to concerns raised by various expert bodies, including the Wanchoo Committee, which underscored the potential misuse of charitable institutions for laundering unaccounted income. The Finance Act, 2006, introduced Section 115BBC into the Income-tax Act, 1961, effective from Assessment Year 2007–08, as a response to such concerns.

The objective of this provision was to enhance financial transparency and curb the channelling of untraceable funds through charitable entities. The section imposed a flat rate of tax at 30% on anonymous donations received by certain specified institutions, without any allowance for deductions or set-offs under any other head of income.

Recognising the operational challenges faced by genuine institutions, particularly in capturing the identity of every small donor, the Finance Act, 2009, introduced a threshold exemption. Donations would not attract tax under Section 115BBC if they did not exceed 5% of the total donations received or Rs. 1 lakh, whichever is higher. This amendment acknowledged that absolute compliance in all cases might not be feasible.

3. Definition of “Anonymous Donation”

Section 115BBC(3) defines an “anonymous donation” as any voluntary contribution referred to in Section 2(24)(iia), where the institution receiving such contribution does not maintain a record of the identity of the person making the donation, including the name, address, and such other particulars as may be prescribed.

No additional particulars beyond name and address have been statutorily prescribed. Therefore, legally, a donation is considered anonymous only if the recipient institution fails to maintain a record of the donor’s name and address.

It is also essential to distinguish between anonymous donations and unaccounted donations. An anonymous donation, while properly recorded in the accounts of the recipient institution, may lack identification details of the donor. On the other hand, an unaccounted donation refers to funds that are not recorded in the financial records at all.

4. The Paradox of Legal Anonymity in a Digitally Traceable Era

Imagine a charitable trust conducting a public fundraising event. Hundreds of well-meaning individuals contribute via UPI or QR code scans. The money is credited into the trust’s bank account, and each transaction carries with it a complete digital trail—transaction ID, time stamp, originating account number, and often even metadata linking to the donor’s name (as held by the bank or payment gateway).

Nevertheless, if the trust fails to extract and record the donor’s name and address in its own systems, the donation may still be treated as anonymous under Section 115BBC. This leads to a jurisprudential and policy paradox:

Can a donation that is technologically traceable and sourced through a KYC-compliant system be considered anonymous in the legal sense merely because the recipient failed to manually log donor details?

While digital infrastructure provides robust traceability, the law continues to impose liability based on manual record-keeping by recipient institutions. This contradicts the original legislative intent behind Section 115BBC, which aimed to unearth concealed sources of income, not to penalise the lack of redundant data entry from transparent systems.

In essence, the law begins to penalise procedural absence over substantive visibility. It raises a fundamental jurisprudential question: should compliance be judged on the availability of data within the system or the manual ability to extract and record it?

5. Legal and Compliance Requirements: Beyond Section 115BBC

While Section 115BBC requires maintenance of name and address, the compliance landscape has expanded significantly over the years:

• The CBDT Notification No. 94/2022, dated 10-08-2022, introduced Rule 17AA, mandating charitable institutions to maintain detailed records of voluntary contributions, including:

1. 1. Name of the donor
   2. Address
   3. Permanent Account Number (PAN), if available
   4. Aadhaar Number, if available

• Further, institutions are now obligated to file an Annual Statement of Donations in Form 10BD, which requires reporting the unique identification number of each donor. Merely recording the name and address is insufficient; compliance with Form 10BD assumes the existence of PAN, Aadhaar, or another prescribed document.

In Radhakrishna Akshar Vikas Nyas v. Asstt. CIT [2024] 161 taxmann.com 739 (Indore ITAT), the Tribunal observed that the absence of PAN or bank details does not automatically render donations above Rs. 50,000 anonymous, provided the trust has maintained a proper record of names and addresses.

Click Here To Read The Full Article