Cash Transactions in Religious Trusts & NGOs: The Anonymous Donation Rule

Charitable and Religious Trusts in India have long been associated with "Hundi" collections and large cash contributions. However, for Assessment Year 2026-27, the "Digital India" mandates have fully reached the social sector. The Income Tax Department now treats Trusts almost like corporate entities when it comes to cash compliance.

Whether you are managing a local temple or a registered NGO, ignoring the Anonymous Donation rules (Section 115BBC) or the ₹2,000 80G limit can lead to the loss of your tax-exempt status (12AB registration).

1. The 30% Tax on Anonymous Donations (Section 115BBC)

"Anonymous Donations" are the biggest tax risk for any trust. If you cannot produce the Name and Address of the donor for a cash contribution, it is taxed.

• The Threshold: Anonymous donations are taxable only if they exceed:
  • 5% of the total donations received by the trust; OR
  • ₹1,00,000 (One Lakh Rupees).
• The Tax Rate: Any amount exceeding the above threshold is taxed at a Flat 30%, regardless of the trust's other exemptions.
• Mixed Trusts: If a trust is wholly religious (like a temple that doesn't run a school/hospital), Section 115BBC does not apply to donations made to the 'Hundi'—they remain tax-free for the trust.

2. The ₹2,000 Barrier: Section 80G Compliance

For NGOs that provide tax benefits to their donors, cash is a liability.

• For the Donor: If a donor gives you ₹2,001 in cash, they lose their entire Section 80G deduction. They will demand a digital payment option.
• For the NGO: You must issue Form 10BE (Certificate of Donation) electronically. If you issue receipts for cash donations above ₹2,000, you are encouraging tax-non-compliance which can lead to a cancellation of your 80G registration.

3. Cash Expenditure Limits (Section 40A(3))

Trusts must "apply" 85% of their income for charitable purposes to stay tax-exempt.

• The Rule: If the trust pays more than ₹10,000 in cash to a single person in a single day for any expense (construction, salary, food distribution), that amount is NOT counted as "Application of Income."
• The Penalty: If this happens frequently, the trust may fall below the 85% threshold, leading to a huge tax bill on the "unapplied" surplus.

4. Cash Receipts and Section 269ST

Even a charitable trust is a "person" under the law.

• The Prohibition: No trust can receive ₹2 Lakh or more in cash from a single person in a single day or for a single transaction.

2. Anonymous "Corpus" Donations: Corpus donations (tied to a specific project like building a hall) must ALWAYS be traceable. If a corpus donation is anonymous, it loses its special "capital" status and is taxed at 30%.
3. Ignoring Form 10BD: Not filing the annual list of donors (Form 10BD) with the department will result in a penalty of up to ₹1 Lakh, besides the donors losing their tax benefits.

Conclusion

To simplify your NGO's audit, implement a "Digital-First" policy for all donations above ₹2,000. For large cash collections (Hundi), ensure the counting happens in the presence of witnesses and is recorded in a signed "Cash Counting Register."

If you are a donor confused about charity limits, read our Section 80G Cash Limit Alert. For assistance with trust registration renewals (12AB/80G), see our Legal Compliance Guide. For help with large cash expenditure notices, refer to our Business Cash Expense Guide. For high-value transactions, refer to the Faceless Assessment survival guide.