Restricted Corpus Donations
Restricted corpus donations are gifts to an NGO given with a specific written direction that they form part of the organisation's corpus — its permanent fund — not to be spent on running costs. They appear on the balance sheet as corpus (a capital fund), not as income. They matter because, under Section 11(1)(d), they are excluded from taxable income but must be invested in the modes specified in Section 11(5).
What Are Restricted Corpus Donations?
A corpus donation is money a donor gives to be kept, not consumed — a permanent endowment whose income, rather than the capital, funds the NGO's work. What makes it a corpus donation is a specific written direction from the donor that the amount is towards the corpus. Without that written direction it is just an ordinary voluntary contribution, treated as income subject to the usual application rules.
An Indian charitable trust or society meets restricted corpus donations when a donor endows a scholarship, a building fund or a named permanent fund. In the books these are credited to a corpus (capital) fund on the balance sheet, not to the income and expenditure account. Under Section 11(1)(d) they are not treated as income, but the law now requires corpus funds to be invested and kept in the modes specified in Section 11(5), and spending from corpus is subject to conditions — so both the direction and the investment trail matter.
Key terms
- Goods Transport Agency (GTA) RCM — A GST reverse-charge concept in logistics, a separate sector.
- Trip-Wise Profit and Loss Statement — A logistics profitability report.
- Fuel Fleet Card Reconciliation — A fleet fuel-spend control, unrelated to NGO corpus.
How Restricted Corpus Donations Work
A corpus gift moves from donor direction to invested fund through a set path:
- 1Obtain the written direction
The NGO secures a letter or email from the donor stating the amount is towards corpus — the document that makes it corpus.
- 2Credit the corpus fund
The receipt is credited to a corpus (capital) fund on the balance sheet, not to income.
- 3Invest under Section 11(5)
The corpus money is placed in a specified mode — government securities, PSU bonds, scheduled-bank deposits — and tracked.
- 4Use only the income for work
The NGO applies the income earned on the corpus to its objects, keeping the capital intact.
- 5Disclose in accounts and return
Corpus additions and balances are disclosed in the financial statements and the income-tax return.
Where Restricted Corpus Donations Applies — NGOs and Non-Profits
Corpus donations arise wherever donors want to endow, not just fund a year:
- Endowment-based charities — Foundations building a permanent fund rely on corpus donations for long-term stability.
- Educational trusts — Schools and colleges receive corpus gifts for named scholarships or building funds.
- Religious and community trusts — Bodies receiving permanent endowments must ring-fence them as corpus.
- Healthcare charities — Hospitals run by trusts take corpus donations for equipment or research funds.
- Alumni and legacy giving — Legacy and alumni gifts are often directed to corpus for lasting impact.
See also: NGO & Non-Profit Accounting Accounting Services for Schools & Colleges
Restricted Corpus Donations: A Practical Example
| Particulars | Amount (INR) | Treatment |
|---|---|---|
| Corpus donation with written direction | 20,00,000 | Credited to corpus fund, not income |
| Invested in scheduled-bank FD | 20,00,000 | Section 11(5) specified mode |
| Annual interest earned | 1,40,000 | Income, applied to objects |
| Corpus capital spent | 0 | Kept intact |
| General donation (no direction) | 3,00,000 | Treated as income, subject to 85% rule |
A Pune medical charity receives ₹20,00,000 from a donor with a written direction that it endow a research fund. Because of that direction, it is credited to the corpus fund under Section 11(1)(d), kept out of income, and invested in a scheduled-bank FD as required by Section 11(5). Only the ₹1,40,000 of annual interest is applied to research. A separate ₹3,00,000 gift with no direction is treated as ordinary income, subject to the 85% application rule — showing why the written direction is decisive.
No written direction on file: Treating a gift as corpus without a written direction is invalid → obtain a dated letter or email from the donor stating it is towards corpus.
Common Mistakes With Restricted Corpus Donations
Corpus errors usually turn on the direction or the investment:
- No written direction on file — Treating a gift as corpus without a written direction is invalid → obtain a dated letter or email from the donor stating it is towards corpus.
- Booking corpus as income — Crediting corpus to income and expenditure overstates income → credit it to the corpus fund on the balance sheet.
- Not investing under 11(5) — Holding corpus outside specified modes breaches the condition → invest corpus in Section 11(5) modes and track it.
- Spending corpus freely — Using corpus capital for running costs without meeting conditions risks tax → apply income, keep the capital intact.
- Weak disclosure — Not disclosing corpus additions and balances fails audit → disclose corpus movements in the accounts and return.
Restricted corpus donations are gifts to an NGO given with a specific written direction that they form part of the organisation's corpus — its permanent fund — not to be spent on running costs. They appear on the balance sheet as corpus (a capital fund), not as income. They matter because, under Section 11(1)(d), they are excluded from taxable income but must be invested in the modes specified in Section 11(5).
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Applicable framework: Income Tax Act 1961 (Sections 11(1)(d), 11(5)); ICAI Technical Guide on NPO accounting. For general information only, not professional advice. Verify the current position for your entity before acting.