The officer has treated our donation box collections as anonymous donations. Is the whole amount taxed at 30%?
No. Section 115BBC charges 30% only on the anonymous donations in excess of the higher of five per cent of the total donations received or Rs 1,00,000, and the rest goes into the ordinary section 11 computation. A donation is anonymous only if you have not maintained a record of the donor's name and address — the section says nothing about PAN and nothing about cash, so a UPI credit with no donor record is as anonymous as a note in a hundi. A trust created wholly for religious purposes is outside the section altogether.
Three things go wrong in practice, and only one of them is about the rate.
The first is the arithmetic. Section 115BBC(1) charges income-tax at thirty per cent, not on the anonymous donations, but on "the aggregate of anonymous donations received in excess of the higher of the following" — five per cent of the total donations received by the assessee, or one lakh rupees. That threshold has been there since assessment year 2010-11. Note what the five per cent is computed on: the total donations received, not the anonymous ones. So a trust with Rs 20,00,000 of total donations of which Rs 2,00,000 are anonymous compares five per cent of Rs 20,00,000, which is Rs 1,00,000, with the flat Rs 1,00,000, takes the higher, and pays thirty per cent on Rs 1,00,000 — Rs 30,000 plus surcharge and cess, not thirty per cent of Rs 2,00,000. A trust with Rs 4,00,00,000 of donations and Rs 15,00,000 anonymous compares Rs 20,00,000 with Rs 1,00,000, and pays nothing under the section at all. Clause (ii) of sub-section (1) then taxes the rest of the total income as it would have been taxed had the excess been taken out.
What happens to the part inside the threshold is a separate question. Section 13(7) reads: "Nothing contained in section 11 and 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of that section." Tax is payable under section 115BBC(1)(i) only on the excess over the threshold, so the portion within the threshold stays in the ordinary computation, counts as income of the trust, and can be applied to the objects like any other voluntary contribution. That is the settled reading, but it is a reading: the sub-section refers to section 115BBC as a whole rather than to clause (i) of sub-section (1), and the ICAI has represented that it should be amended to say so expressly.
The second thing that goes wrong is the test. Section 115BBC(3) defines an anonymous donation as a voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, "where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed". Two consequences follow. Nothing turns on the mode of payment — the section is not a cash provision, and a bank transfer or a UPI credit for which no donor record was kept is caught by the words just as a hundi note is. And the particulars required are the name and the address; no further particulars have been prescribed for the purpose of this section, so a demand for the donor's PAN is a demand the section does not make. The Tribunal has said as much. In ITO v. Saraswati Educational Charitable Trust (ITAT Lucknow, order of 17 June 2015, assessment year 2010-11) the bench put it that "Since no other particulars have been prescribed under the provisions the person receiving the donation is under obligation to maintain the identity of donors indicating the name and address only." The same point was decided in ACIT v. Siddhartha Academy of General & Technical Education (2022) 216 DTR 203 / 218 TTJ 899 / 141 taxmann.com 287 (Visakha)(Trib), where details of some 2,300 donors with names, addresses and confirmation letters were held enough and the absence of PAN in the confirmations was held not to make the donations anonymous, and in Radhakrishna Akshar Vikas Nyas v. ACIT [2024] 161 taxmann.com 739 (Indore)(Trib). Each of those three decisions appeared on a single host in this research and none of them is written up as a case entry in this library for that reason; treat them as pointers to look up rather than as verified authority.
That is the section. It is not the whole of the record-keeping obligation. Rule 17AA, which was inserted with effect from 10 August 2022 and governs the books of account and other documents a trust has had to keep since assessment year 2023-24, requires among other things a record of "the contribution received during the previous year containing details of name of the donor, address, permanent account number (if available) and Aadhaar number (if available)". So PAN and Aadhaar do have to be recorded where the donor gives them — but under the rule, and with the "if available" qualification, and a failure there is a books-and-records failure, not by itself proof that the donation was anonymous within section 115BBC(3).
The third thing that goes wrong is the exclusion. Section 115BBC(2) provides that sub-section (1) shall not apply to any anonymous donation received by "(a) any trust or institution created or established wholly for religious purposes; (b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution". Read the two limbs apart. A wholly religious trust is outside the section without qualification — its donation box is not a section 115BBC problem at all. A trust that is religious and charitable is also outside it, but with a carve-out: an anonymous donation given with a specific direction that it is for the trust's school, college, hospital or dispensary remains chargeable. A trust that is charitable only gets nothing from sub-section (2).
Which limb a trust falls in is decided on its deed. That is the point of the Bombay High Court's decision in CIT (Exemptions) v. Shree Sai Baba Sansthan Trust — Shirdi, where the department argued that a trust holding section 80G approval could not be a religious trust and so could not claim clause (b). The Court held that section 80G and section 115BBC(2)(b) are compartmentalised and independent of each other, and that the operation of clause (b) rests on a factual determination of the trust being religious and charitable ascertained from the contents of the trust deed. Rs 159.12 crores of hundi collections stayed out of charge.
Finally, the section only ever applies to the entities listed in sub-section (1) — a person in receipt of income on behalf of a university or other educational institution or a hospital or other institution or a fund or institution or trust falling within the specified sub-clauses of section 10(23C), or a trust or institution referred to in section 11. An unregistered body outside all of those is not assessed under section 115BBC at all; if the department wants to tax its receipts it has to do so under some other head, which is a different fight.
A donation-box addition is arithmetic before it is anything else, and the arithmetic in the notice is usually wrong. Officers routinely apply thirty per cent to the gross anonymous figure, treat the absence of PAN as proof of anonymity, and ignore sub-section (2) entirely for a temple or dargah that also does charitable work. Each of those three is answerable from the words of the section without argument about facts. Getting the reply right also decides how much of the trust's income survives for the section 11 computation, because section 13(7) removes the exemption only for the taxable slice.
We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
A binding decision that covers my point was never considered when my order was passed. Is that a mistake apparent from the record?
Our trust runs a business and puts the profit into its objects. Does s.11(4A) still deny the exemption?
Our trade association promotes commerce in our industry, but the work it does throws up a surplus every year. Does the surplus stop it being charitable?
Our trust benefits one caste. Can that be a charitable purpose at all?
Our trust was formed weeks ago and has done nothing yet. Can registration be refused for that?
My trade association only helps its own trade and its members get a benefit from it — can it still be charitable?
The Commissioner has refused my trust registration under section 12AA because our objects are tied to one religious community — can he refuse registration on that ground?
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