Funding topic 3 of 12
Domestic voluntary contributions
A genuine domestic contribution may be accepted where lawful and within the company’s objects.
Record the donor and purpose
Obtain the legal name, address, constitution, authorised contact and source declaration proportionate to the transaction. Match bank remitter and donor; investigate third-party payments. Obtain a signed letter specifying amount or assets, purpose, conditions, ownership, reporting, refund triggers and whether any benefit is expected. Preserve evidence; a declaration is not conclusive proof of source.
Receipt and communication
Issue an ordinary numbered acknowledgement stating date, amount, mode, transaction reference and purpose. Do not describe it as an 80G certificate or promise a deduction without valid eligibility and approval. Prefer traceable banking. Evaluate cash-receipt restrictions under the law for the relevant period before accepting cash; splitting payments is not a solution.
Use and segregation
Create a donor/project ledger and reconcile it to the bank. A dedicated account is useful for substantial restricted projects and compulsory where the agreement or law requires it; it is not a universal rule for every domestic gift. Apply an approved beneficiary policy. Directors cannot appropriate support personally, and a donor cannot gain voting rights merely by giving money.
Practical questions
Can an individual or private institution give a donation?
Generally yes, if genuine, lawful and within the company’s objects. Obtain a purpose letter, source evidence, Board approval and an accounting/tax review. Do not offer shares, repayment or services while calling the receipt a donation.
Read the topic and sourcesCan a director or member donate?
A genuine contribution is possible subject to source, purpose, approval and tax review. Keep it separate from share capital, member loans, produce-payments and dues. Disclose interests; a donation does not create extra votes or repayment rights.
Read the topic and sourcesCan we accept anonymous or cash donations?
Do not establish anonymous cash collection as a routine funding model. Trace the donor and source and review applicable cash-receipt restrictions and tax implications for the relevant period. A later deposit into the bank does not cure an unlawful cash receipt.
Read the topic and sourcesWhat should an ordinary receipt contain?
Company name, CIN, address, receipt number, date, donor, amount or asset description, payment reference, purpose and authorised acknowledgement. State that it is not an 80G certificate where applicable. Avoid an unconditional tax-deduction promise.
Read the topic and sourcesIs a separate bank account mandatory?
Not for every domestic contribution simply because it is called a grant. The sanction, agreement, scheme or specific law may require one. Always maintain an identifiable project ledger; a dedicated account can improve control for a material restricted project.
Read the topic and sourcesCan support be distributed directly to members?
Only where it is an authorised, properly designed project benefit with transparent eligibility, donor permission and tax review. Do not turn restricted funds into dividends or selectively pay directors. Keep beneficiary approvals and payment evidence.
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