Trusts and other charitable institutions generally receive money from Voluntary Contributions from members and from the general public, let us look at the taxation aspects of these voluntary contributions. → Whether voluntary contribution received can be treated as income? As per section 2(24)(iia) of the Income Tax Act’1961 voluntary contributions received by a trust or institution existing for charitable purposes is the income of the trust or institution. Institution means institutions existing for charitable purposes as per Section 2(15) of the Income Tax Act’1961. Example society running educational institutions like school will be covered in the definition of institution running for charitable purposes. → Whether voluntary contribution received will always be treated as income of the trusts or institution running for charitable purpose? 1) As per section 11(1)(d) of the Income Tax Act 1961 voluntary contributions received by the trust or charitable institutions with a specific direction that the contribution shall form part of the corpus of the trust or institution shall not be treated as income of the trusts or institution. 2) As per Section 12 of the Act, any voluntary contribution not with a specific direction that it will form part of the corpus will be treated as income of the trust or institution existing for charitable purposes. 3) As per section 12A of the Income Tax Act’ 1961, the benefit of Sections 11 & 12 will be available only if the trust or the institution is registered under the Income Tax Act as a trust or charitable institution u/s 12AA. Therefore in light of the above tax treatment of voluntary contributions can be summarised as follows: A) Voluntary contribution received with a specific direction that it forms part of the corpus of the trust is treated as follows: 1) If the trust or charitable institution is registered u/s 12AA of the Income Tax Act’1961: ♠ Then not taxable as per section 11(1)(d) of Income Tax Act’1961. 2) If the trust or institution is not registered U/s 12AA- ♠ Then voluntary contribution received is taxable as per Sec 2 (24) (iia) of the Income Tax Acyy’1961. B) Voluntary contribution received (without direction that it forms part of corpus) is generally taxable under the head income from other sources. Important Note: As per section 115BBC of the Income Tax Act: “Anonymous Donations” means any voluntary contribution 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. “Anonymous donations” are not taxable under section 115BBC if: (i) Such donations are received by any trust/institution established wholly for religious purposes. Therefore in case of a trust owning a temple, the offerings/donations made by the devotees etc. shall not be taxable under this section even if the names/addresses of donors are not there. Such donations shall be subjected to provisions of section 11 & 12. (ii) Such donations are received by any trust/institution established wholly for religious and charitable purposes. However such donations shall be taxable under section 115BBC if the anonymous donation is made with specific direction that such donation is for any university/school/educational institution/hospital/medical institution run by such trust i.e other than religious purposes. Therefore keep record of persons when receiving voluntary contribution in trusts or other charitable institutions (other than religious institutions) such as name, address, PAN otherwise it can be taxed at Maximum marginal rate as anonymous donations as per Section 115BBC of the Income Tax Act’1961.