Corpus Donations Explained Simply: Rules Every NGO Needs

Corpus Donations Explained Simply: Rules Every NGO Needs

Think of your NGO's money like a family's money.

Normal donations are like the salary that comes in every month. It is meant to be spent.

Corpus donations are like the family gold. You keep it. You do not sell it to buy vegetables. It stays, and it gives you security.

That is the whole idea of corpus.

The problem is that many NGOs mark money as "corpus" when it is not, or spend corpus money without knowing the rules. Both mistakes are expensive.

This guide explains it in simple words, with one example running through it.

Meet Nav Jeevan Trust

Nav Jeevan Trust runs a small hospital. Last year three people gave them money:

Three donations. Three completely different treatments. Let us see why.

The three types of donation

This is the table most NGOs need on their wall.

Look carefully at the middle column. A donation for a specific project is not corpus. It still counts in your 85% spending target.

This is the number one mistake. NGOs see "the donor gave instructions" and think it is corpus. It is not.

For Nav Jeevan Trust:

• Mr. Sharma's ₹25 lakh = corpus. Kept out of the 85% calculation.

• The company's ₹10 lakh = restricted. Counts in the 85%.

• Local donors' ₹40 lakh = general. Counts in the 85%.

So their income for the 85% rule is ₹50 lakh, not ₹75 lakh.

What actually makes a donation "corpus"

Only one thing:

The donor must give a specific written direction that the money is for your corpus.

Not a phone call. Not an assumption. Not your own decision.

You cannot make a donation into corpus by yourself. If a donor gives ₹5 lakh and says nothing, you cannot decide later to call it corpus. It is general income and you must spend 85% of it.

One rule that surprises people

Money from a donation box cannot be corpus — even if you write "Corpus Donation" on the box.

Why? Because nobody can identify who gave it or show their written direction. Donation box money is general income.

The 4 rules for corpus money

Once you accept a corpus donation, four things apply.

Rule 1: Keep it separate

Corpus money must be invested or deposited separately from your normal funds. It cannot be mixed into your general bank account.

The simplest way: open a separate bank account only for corpus. A savings or current account is fine — a bank deposit is an approved way of holding corpus.

If you mix it up, you will not be able to prove it was corpus, and the exemption can be lost.

Rule 2: Keep the donor's letter

Get it in writing at the time of the donation. Not later.

A simple letter or signed form saying:

"I am donating ₹____ to [NGO name]. This amount is towards the corpus fund of the organisation."

Keep it in your files. Your auditor will ask for it.

Rule 3: Report it in Form 10BD

When you file your annual donation statement, corpus donations must be reported with the donation type marked as corpus. Do not report them as ordinary donations.

Rule 4: Be careful before spending it

This is where NGOs get hurt. See the next section.

What happens if you spend corpus money?

Nav Jeevan Trust had an emergency. A hospital generator failed. They took ₹4,00,000 from the corpus account to replace it.

Reasonable decision. But here is what the tax rules say.

That ₹4 lakh does NOT count as your spending this year.

Even though the money left your bank. Even though it was used for genuine hospital work. It does not count towards your 85%.

So is the money lost?

No — but you have to earn it back.

You get to count it later, when you put the money back into the corpus account.

The conditions:

• You must deposit it back into your corpus account from that year's income

• You must do this within 5 years from the end of the year you spent it

• Only the amount you actually put back counts

So Nav Jeevan Trust spent ₹4 lakh from corpus this year. If they put ₹4 lakh back into the corpus account next year, that ₹4 lakh counts as their spending next year.

If they never put it back within 5 years, they simply lose the benefit — and their corpus is permanently smaller.

Simple rule to remember: Spending corpus does not count. Putting corpus back does count.

Extra conditions when you replenish

When you put the money back, the original spending must also have followed the normal rules:

• TDS deducted where required

• No cash payment above ₹10,000 to one person in a day

• Money spent in India

• No benefit to trustees or their relatives

• Not given as a corpus donation to another NGO

The mistake that costs the most

Never give a corpus donation to another NGO.

If your NGO donates to another NGO's corpus fund, none of it counts as your spending. Not 85%, not any part. Zero.

Compare:

If you support partner organisations, always give normal donations, never corpus donations.

What about interest earned on corpus?

Nav Jeevan Trust's ₹25 lakh corpus earns ₹1,50,000 in bank interest.

That interest is normal income. It counts in your 85% calculation and should be spent on your work.

The only exception is if the donor specifically wrote that the interest should also be added to the corpus. Then it stays as corpus.

Common mistakes to avoid

Common questions

Is corpus money completely tax free? Yes, as long as you keep it in an approved form and maintain it separately for corpus. It does not enter your income at all.

Can a donor claim 80G on a corpus donation? Generally yes, if your NGO has valid 80G registration. Confirm the details with your CA.

What if the donor gave money verbally as corpus? Then it is not corpus. Get the written direction before you record it. If the donor is willing, ask them to send a short email or letter.

Can we use corpus money in a real emergency? Yes, nothing stops you from spending it. Just understand that it will not count as your 85% spending until you replace it, and you have 5 years to do that.

We have had corpus in our general account for years. What now? Speak to your CA immediately and move it to a separate account. Do not wait for the audit.

Does corpus reduce our 85% target? Yes, and that is the real benefit. Corpus is removed from your income before the 85% is calculated, so your spending target is lower.

Is a big corpus a good thing? Financially, yes — it gives your NGO stability and shows funders you are serious. But do not let a large corpus become an excuse for low spending on your actual work. Funders look at that too.

The simple version

If you remember only four things:

1. Corpus needs the donor's written instruction. Nothing else makes it corpus.

2. Keep it in a separate bank account. Always.

3. Corpus stays out of your 85% calculation. That is its big advantage.

4. Spending corpus does not count. Putting it back does. Within 5 years.

Most corpus problems come from one place: not knowing which money is which. When corpus, restricted and general funds all sit in the same account, the truth only comes out during the audit — when it is too late to fix.

Sevastack keeps corpus, restricted and general funds separate from the moment money arrives, stores each donor's corpus direction against their record, and marks the correct type when you file Form 10BD. Start free — no credit card needed.

This article is general information, not tax advice. Please check your NGO's exact position with your Chartered Accountant.

Related guides

• The 85% Rule for NGOs: A Simple Guide With Examples

• NGO Compliance Calendar 2026-27: Every Deadline

• Form 10B vs Form 10BB: Which Must Your NGO File in 2026?

• Form 10BD and Form 10BE Due Dates 2026

• NGO accounting software built for Indian compliance