Corpus & Deemed Corpus Donation for Registered Non-Profit Organisations

Corpus Donation and Deemed Corpus Donation for Registered Non-Profit Organisations

Sections 339 and 340 specifically deal with corpus donations and donations that may be treated as corpus under certain circumstances.

These provisions clarify the conditions under which donations qualify as corpus and the treatment of donations received for renovation or repair of religious places owned by an NPO.

1. Corpus Donation – Section 339

A corpus donation refers to a donation made to a registered NPO with a specific direction from the donor that the amount should form part of the corpus (capital fund) of the organisation.

Unlike normal voluntary contributions which are generally treated as income of the trust, corpus donations are treated as capital receipts and are typically not required to be applied as part of the annual application of income.

For a donation to qualify as a corpus donation, the following conditions must be satisfied:

1. The donor must clearly specify that the donation is intended to form part of the corpus of the organisation.
2. The corpus amount must be invested or deposited in the modes specified under Section 350.
3. The organisation must maintain proper records and accounts to identify the corpus separately from other funds.

The specific direction from the donor is the most critical requirement. Without such direction, the contribution will be treated as a normal voluntary contribution and not as corpus.

This direction is generally obtained through:

• Donation letters
• Written instructions
• Specific mention in the donation receipt

Permitted modes of investment.

Section 350(1) provides that the money referred to under this Part must be invested or deposited only in the modes specified in Schedule XVI.

Section 350(2) empowers the Central Government to notify additional investment modes

Schedule XVI of Income Tax 2025

The permitted forms or modes of investment or deposit for a registered non-profit organisation under section 350 include the following:

1. Investment in savings certificates as defined under the Government Savings Certificates Act, 1959 and other securities or certificates issued by the Central Government under Small Savings Schemes.
2. Deposit in any account with the Post Office Savings Bank.
3. Deposit in any account with a scheduled bank or a co-operative society engaged in the business of banking, including co-operative land mortgage banks and co-operative land development banks.
4. Investment in units of the Unit Trust of India.
5. Investment in securities issued by the Central Government or any State Government.
6. Investment in debentures issued by, or on behalf of, any company or corporation where both the principal and interest are fully and unconditionally guaranteed by the Central Government or a State Government.
7. Investment or deposit in any public sector company, subject to the condition that if such company ceases to be a public sector company, the investment in shares shall remain valid for three years from the date of such change and other deposits shall remain valid until repayment becomes due.
8. Deposits with or investment in bonds issued by a financial corporation engaged in providing long-term finance for industrial development in India and eligible for deduction under section 32(e).
9. Deposits with or investment in bonds issued by a public company formed and registered in India with the main object of providing long-term finance for construction or purchase of residential houses and eligible for deduction under section 32(e).
10. Deposits with or investment in bonds issued by a public company formed and registered in India with the main object of providing long-term finance for urban infrastructure.
11. Investment in immovable property.
12. Deposits with the Industrial Development Bank of India.
13. Investment in units issued under any scheme of the mutual fund referred to in Schedule VII.
14. Transfer of deposits to the Public Account of India.
15. Deposits with an authority constituted under law for the purpose of housing development or planning, development or improvement of cities, towns and villages.
16. Investment by way of acquiring equity shares of a depository as defined under the Depositories Act, 1996.
17. Investment made by a recognised stock exchange in the equity share capital of a company engaged in securities market activities and structured in accordance with guidelines issued by the Securities and Exchange Board of India.
18. Investment made by a person authorised under the Payment and Settlement Systems Act, 2007 in equity shares, bonds or debentures of a company engaged in retail payment systems or digital payment settlement activities approved by the Reserve Bank of India and where at least 51% equity is held by the National Payments Corporation of India.
19. Investment made by a person authorised under the Payment and Settlement Systems Act, 2007 in equity shares, bonds or debentures of Open Network for Digital Commerce Limited for participating in network-based open protocol models enabling digital commerce and interoperable digital payments.
20. Investment by an incubator in equity shares of an incubatee.
21. Investment by way of acquiring shares of the National Skill Development Corporation.
22. Investment in debt instruments issued by an Infrastructure Finance Company registered with the Reserve Bank of India.
23. Investment in stock certificates under the Sovereign Gold Bonds Scheme, 2015.
24. Investment by way of acquiring units of Powergrid Infrastructure Investment Trust.
25. Investment in shares of a public sector company.
26. Assets held by the trust or institution which formed part of the corpus as on 1 June 1973.
27. Equity shares of a public company forming part of the corpus of any university, educational institution, hospital or medical institution as on 1 June 1998 where such institution was approved under section 10(23C) of the Income-tax Act, 1961.
28. Accretions to the shares forming part of the corpus mentioned above by way of bonus shares.
29. Debentures issued by any company or corporation acquired by the trust or institution before 1 March 1983.
30. Voluntary contributions received and maintained in the form of jewellery, furniture or other articles as may be notified by the Board.
31. Any asset not falling within the above specified modes may be held for a period up to one year from the end of the tax year in which such asset is acquired.
32. Funds representing profits and gains of business of a tax year, provided separate books of account are maintained where the organisation has other income in addition to such business income.

2. Deemed Corpus Donation – Section 340

Section 340 provides a special provision relating to donations received for the renovation or repair of religious places owned by a registered non-profit organisation (NPO).

Where the property of the NPO includes a temple, mosque, gurudwara, church, or any other place notified under section 133(1)(b)(vi), any donation received specifically for the purpose of renovation or repair of such place may, at the option of the organisation, be treated as forming part of the corpus.

This provision recognises that such donations are generally intended for the restoration or maintenance of religious structures and are therefore in the nature of capital contributions rather than routine charitable expenditure.

However, for such donations to be treated as corpus under section 340, the following conditions must be satisfied:

1. maintains such corpus as separately identifiable
2. applies such corpus only for the purpose for which the donation was made
3. invests or deposits such corpus in any of the modes permitted under section 350; and
4. does not apply such corpus for making donation to any person. 

Corpus Donation Vs Deemed Corpus Donation

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DISCLAIMER: The views expressed in this article are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation by the author. The author does not accept any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.