Inter Charity Donations

Inter Charity Donations

An inter-charity donation refers to the act of one registered Non-profit organization giving a donation or grant to another registered Non-profit organization that also enjoys tax exemption under Part B “Special provisions for registered non-profit organisation” of the Income Tax Act, 2025. However, it is important to make a note that the organization giving the donation and the organization taking the donation should have a similar objective. Further, Donations made by one Non-profit organisation to another can generally fall into three distinct categories. Each category is treated differently under the Income Tax Act, 2025: 

1. Donation out of Current years’ income - When a Non-profit organisation donates from its current year's income to another organisation registered under Section 332, such donation is regarded as application of income under Section 341(1)(b) (subject to the 85% restriction). 
2. Donation out of Current years’ income - An organisation may choose to accumulate or set apart income under Section 342(1) for future charitable application. However, section 342(2) prohibits the application of such accumulated income by way of donation to another charitable or religious organisation.

However, as per the proviso to Section 342(7), the Assessing Officer may, on an application made by such registered non-profit organisation in such form and manner, as may be prescribed, allow application of such income to be made to any other registered non-profit organisation for the year in which it is dissolved.

3. Donation towards corpus - According to Section 341(3)(c), any contribution made by one registered non-profit organisation to another registered non-profit organisation with a specific direction that it shall form part of corpus of recipient organization, shall not be treated as application of income. 

Summary Table: Inter-Charity Donation Principle with effect from 01.04.2026