A trust, society or Section 8 company registered under Section 12AB is exempt from income tax under Section 11 on income applied for charitable or religious purposes — provided at least 85% of income is applied during the year (up to 15% may be accumulated). Income not applied, anonymous donations and Section 13 violations are taxable at 30%. Donors to an 80G-approved NGO claim a deduction; the NGO itself gets no 80G benefit.
Is My NGO Income Taxable? — Decision Table
What is exempt and what is taxed for a registered NGO under the Income-tax Act, 2025.
| Type of income / situation | Taxable? | Rate | Notes |
|---|---|---|---|
| Income applied to charitable objects (min 85%) | No | Exempt | Section 11 — core exemption |
| Up to 15% accumulated / set apart | No | Exempt | No approval needed for the 15% |
| Income accumulated u/s 11(2) (Form 10) | No | Exempt | If applied within 5 years for stated purpose |
| 85% not applied & not accumulated | Yes | 30% | Shortfall taxed as deemed income |
| Anonymous donations (Sec 115BBC) | Yes | 30% | Above Rs1L or 5% of donations |
| Benefit to specified person (Sec 13) | Yes | 30% | Can forfeit whole exemption |
| Business income not incidental to objects | Yes | 30% | No separate books = exemption risk |
| Unregistered NGO (no 12AB) | Yes | Slab / 30% | Taxed as an AOP / company |
Rates and sections reflect the Income-tax Act, 2025 (applicable from AY 2026-27). Section numbers were renumbered from the 1961 Act — always confirm on incometax.gov.in before filing.
At least 85% of the income derived from trust property must be applied to the objects in the same financial year. Any shortfall that is neither spent nor validly accumulated (Form 9A / Form 10) becomes deemed income and is taxed at the flat 30% maximum marginal rate — not the slab rate.
The 85% Application Rule & Accumulation
Section 11 exempts income of a registered trust to the extent it is applied in India for charitable or religious purposes. The rule works on a simple split:
Must be applied
- Spent on the stated charitable objects
- Within the same financial year
- Revenue spend and capital assets both count
- Corpus donations to other trusts do not count
- Application must be inside India
May be retained
- Accumulated / set apart automatically
- No prior approval or form needed
- Held as corpus for the trust
- Extra accumulation needs Form 10 (5-year cap)
- Must be invested in permitted modes u/s 11(5)
- If the 85% cannot be applied because income was not received in the year, file Form 9A to defer application to the next year.
- To accumulate beyond 15% for a specific purpose, file Form 10 and apply the money within 5 years.
- Accumulated funds must be invested in government securities, scheduled-bank deposits or other Section 11(5) modes — not shares of private companies.
The 15% accumulation is computed on gross income, but Form 9A and Form 10 must be filed on the e-filing portal before the ITR due date. Miss the form and the accumulation is disallowed even if you genuinely intended to spend the money later — a very common cause of NGO tax demands.
Not sure your 85% application is documented correctly?
Talk to an NGO Tax Expert →12A vs 12AB Registration — What Changed
Exemption under Section 11 is available only with a valid registration. The old perpetual Section 12A was replaced by the time-bound 12AB regime — every existing 12A NGO had to migrate, and new NGOs get a 3-year provisional registration first.
| Feature | Old — Section 12A | New — Section 12AB |
|---|---|---|
| Applies to | Legacy registrations (pre-2021) | All registrations from April 2021 |
| Validity | Perpetual, no renewal | 5 years — renew before expiry |
| Apply via form | Form 10A (historical) | Form 10A (new/provisional) · Form 10AB (renewal) |
| Approval order | No time limit | Form 10AC / 10AD from the department |
| Provisional route | Not applicable | 3-year provisional for new NGOs |
| Old 12A validity | Migrated to 12AB | Old 12A alone is no longer valid |
12AB registration is a precondition for both the Section 11 exemption and 80G approval. Renew before the 5-year expiry to avoid losing exemption.
Registering a new trust, society or Section 8 company?
Get 12AB Registration →Section 80G — Deduction for Donors, Not the NGO
80G is a benefit for the donor, not the NGO. Once the department grants 80G approval, individuals and businesses that donate can deduct part of the donation from taxable income. The NGO applies for 80G separately from 12AB.
- 50% deduction — donations to most approved NGOs, capped at 10% of adjusted gross total income.
- 100% without limit — PM National Relief Fund, National Defence Fund and select government funds.
- Donors need a receipt with the NGO’s PAN and 80G number, and the NGO must file Form 10BD and issue Form 10BE certificates.
- Cash donations above Rs2,000 do not qualify — use banking channels.
- 80G is claimed under the old regime; the new default regime (Section 115BAC) does not allow it.
From AY 2026-27 the new tax regime is the default, and under it a donor gets no 80G deduction. Donors who want the 80G benefit must opt out into the old regime. Remind your donors so the receipt actually saves them tax.
Want your donors to claim 80G? Get approval and Form 10BD sorted.
Get 80G Approval →Audit, ITR-7 & Section 13 Traps
A registered NGO whose total income before the Section 11 exemption exceeds Rs5,00,000 must get its accounts audited by a Chartered Accountant and file the audit report before the ITR due date:
- Form 10B — charitable trusts and NGOs not under Section 10(23C).
- Form 10BB — educational institutions, hospitals and similar bodies.
- The return itself is filed in ITR-7; the audited due date is generally 31 October of the assessment year.
Exemption is safe when
- 85% of income is applied and documented
- Form 9A / Form 10 filed on time where needed
- 12AB and 80G registrations are live and renewed
- Accounts audited (Form 10B/10BB) above Rs5L
- Funds invested only in Section 11(5) modes
Exemption is at risk when
- Income benefits a founder, trustee or relative (Sec 13)
- Any funds go to a political party
- Business income is not incidental / no separate books
- Anonymous donations exceed the Sec 115BBC limit
- Audit report or ITR-7 is filed late
A single Section 13 breach — even a small loan or rent-free premises to a trustee — can forfeit the exemption for the whole year, taxing the entire income at 30%. Keep related-party transactions at arm’s length and disclosed.
Frequently Asked Questions
Related TaxClue services
12AB, 80G & ITR-7 for Your NGO — Handled
Our CA-led team runs end-to-end NGO tax compliance — 12AB registration, 80G approval, Form 10B audit, Form 10BD donor reporting and ITR-7 filing — 100% online, across India.