Finance Act, 2006 has inserted a new section 115BBC with regard to treatment of anonymous donation. Earlier all voluntary donation received by charitable institution, including anonymous donation (except voluntary donation with a specific direction that they shall form a part of corpus of the trust) shall be included in the income and charitable trust or institution is a part of income of that trust or institution and this income is subject to application for charitable purpose. To curtail the inflow of unaccounted money in the form of anonymous donation, Finance Act, 2006 has inserted a new section 115BBC in which anonymous donation is taxable at the rate of thirty percent. This thirty percent tax rate is applicable without any deduction or set off of in any other head.
Later in Finance Act, 2009, Section 115BBC was amended to provide some relief to the genuine voluntary organization receiving anonymous donation. In Finance Act, 2009 section 115BBC was amended to provide that anonymous donation to such organization up to 5% of total donation or one lakh rupees, whichever is higher, would be exempt.
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Taxability of anonymous donations:-
As per sub-section (1) of Section 115BBC anonymous donation shall be taxable at the rate of thirty percent on anonymous donation received in excess of the higher of the following two amount;-
- Five percent of the total donation received; or
- One lakh rupees.
Cases when section 115BBC will not apply:-
Anonymous donation shall not be taxable in the following cases;
- When anonymous donation is received by wholly religious institution.
- When 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 institutions run by such trust or institution.
- Any university or other educational institution covered under 10(23C) (iiiab) wholly or substantially financed by the Government.
- Any hospital or other institution covered u/s 10 (23C) (iiiac) wholly or substantially financed by the Government.
Meaning of anonymous donation:-
Meaning of Anonymous donation has been defined under section 115BBC. Anonymous donation means any voluntary contribution referred 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 name, address etc.
Circular issued by CBDT w.r.t. Section 115BBC:-
CBDT has issued an explanatory circular regarding section 115BBC vide Income Tax Circular No. 14 dated 28.12.2006. In this circular CBDT has explained the provision of section 115BBC as under :
“With a view to prevent channelization of unaccounted money to these institutions by way of anonymous donations, a new section 115BBC has been inserted to provide that 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 per cent. Anonymous donation 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”
CBDT has issued another explanatory circular regarding amendment in section 115BBC vide Circular No. 05 dated 03.06.2010. in this circular CBDT has explained the amended provision of section 115BBC as under :-
“Under the provisions of section 115BBC, wholly religious entities are outside the purview of taxation of anonymous donations. Partly religious and partly charitable entities had also been exempted from the taxation of anonymous donations, except where the anonymous donation is made to an educational or medical institution run by such entity in which case such donations were taxed at the rate of 30 per cent. In the case of wholly charitable entities, all anonymous donations are taxed at the rate of 30 per cent.
It was observed that in the case of some such institutions, there are practical difficulties to maintain complete records of donation received. In order to mitigate the compliance burden, the above section was amended and some relief was provided to such organizations by exempting a part of the anonymous donations from being taxed. The amendment has resulted in the following scheme :—
1. Anonymous donations received by wholly religious institutions shall remain exempt from tax.
2. In the case of partly religious and partly charitable institutions, anonymous donations directed towards a medical or educational institutions run by such entities shall be taxable only to the extent such donations exceed 5 per cent 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.
3. In the case of wholly charitable institutions, anonymous donations shall be taxable only to the extent such donations exceeding 5 per cent of total donations received by such trust or institution or a sum of Rs. 1 lakh, whichever is more.”
So from the above, it is clear that anonymous donation is taxable at the rate of thirty percent of the anonymous donation in excess of five percent of total donations or one lakh rupees whichever is higher. This tax shall be calculated without any deduction or any set off.
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What are the particulars prescribed to be maintained in respect of voluntary contributions so that it may not be treated as anonymous donation ?
As per Sub-section (3) of Section 115BBC, anonymous donation means any 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.
Now your query is that in case, donor only provide name and address and does not provide PAN to the donee, will it be treated as anonymous donation?
Section 115BBC provide a relief to the donee not to tax donation higher of the below amount:-
1) 5% of the total donation received by the assessee or
2) One Lakh rupees.
Further as per clause (viii) of sub-section (5) of section 80G, the institution or fund prepares such statement for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or such person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.
So in order to avoid any taxation at the rate of 30%, PAN number should be taken from the donor as institution is only allowed to take anonymous donation up to higher of 5% of the total donation or one lakh rupees. At last it it better to take PAN in order to claim deduction by the donor under section 80G.
Please feel free to contact in case you need any further assistance
A donor is willing to provide name & address but not the PAN number. Will this be treated as Anonymous donation?