Why the tax treatment of crowdfunding depends on the model
Tax on crowdfunding in India depends less on the fact that money was raised online and more on who receives it and what the giver gets in return. A donation to an approved charity can earn the donor a deduction, a gift to a private individual can become taxable income for that person, and fees paid to the platform attract goods and services tax. No single page of tax law covers all of it.
This matters because a campaign often looks identical from the outside. A hospital appeal run by a registered charity, a personal appeal by a patient’s brother and a start-up raising capital all use a link and a payment button, yet each sits in a different corner of the tax system.
An important timing point applies to every case. The Income-tax Act 2025 received assent on 21 August 2025 and applies from 1 April 2026, which is financial year 2026-27 and assessment year 2027-28. The 1961 Act continues to govern years up to 31 March 2026. A donation made in March 2026 and one made in April 2026 are therefore read under different statutes, even if the rules look alike.
New Income-tax Rules 2026 were notified to replace the 1962 Rules, effective 1 April 2026, with a common application form for trust registration and donation approvals.
Donor deductions: approval, receipts and Section 80G
A donor receives an income-tax deduction only when the charity holds a valid approval for it. Under the old tax regime the receipt must also show the charity’s details. Section 80G of the 1961 Act, which deals with deductions for donations to certain funds and charitable institutions, is carried forward as section 133 of the 2025 Act.
How does a charity obtain the approval? The Income Tax Department explains that Form 105 is the application for regular registration or approval of non-profit organisations under section 332(3) or 354(2) of the 2025 Act. Approval preserves the organisation’s exemptions and lets donors claim deductions. The order granting registration is Form 107, which carries a 16-digit Unique Registration Number.
Form 105 can be withdrawn within seven days of filing and is filed by registered e-Filing users other than individuals. A donor can ask the charity for its Form 107 number and URN, and ask for them before paying, which is easier to check than a general promise that donations are tax-exempt.
What a platform may say
Give.do, one donation platform, states that donations may qualify for Section 80G and that Form 10BE is issued by the end of May of the following financial year. The word may is important: eligibility depends on the specific charity and not on the platform.
Ask a chartered accountant for the section of the 2025 Act that replaces the earlier 12A and 12AB registration route, and for the percentage limits that apply under section 133.
Personal appeals and the Rs 50,000 gift rule
Many Indian campaigns are not run by charities at all. A family raises money for a surgery in the patient’s name. Gifts received without consideration above an aggregate of Rs 50,000 in a financial year can be taxable for individuals and Hindu undivided families. Section 56(2)(x) of the 1961 Act is the provision, and section 92(2)(m) of the 2025 Act corresponds to it.
The threshold is a total across the year, not per donor. A campaign that gathers many small contributions can pass it quickly. Whether a particular medical or personal appeal is taxed, exempted by a relationship rule or treated differently is a question for a chartered accountant.
Ask a chartered accountant how returns on crowdfunding, such as interest on a peer-to-peer loan, are taxed. The same applies to TDS rules.
Donors should not assume that giving to an individual earns a deduction. Without a charity’s approval, no Section 80G or section 133 claim exists, so a receipt from a private person or an unapproved group should never be filed as a donation claim.
GST and platform charges
Platform fees carry goods and services tax. ImpactGuru states that 18 per cent GST applies on service and processing charges, and Ketto states that 18 per cent GST is charged on top of its success fee and on its gateway fee. Milaap says its platform fee is zero but warns that gateway charges and taxes can still reduce what is disbursed.
These taxes are paid on the platform’s charges, not on the donation itself. If a platform charges 5 per cent and a gateway charges 3 per cent, the extra 18 per cent applies to those fees, and the beneficiary receives the remainder.
A separate circular from the Central Board of Indirect Taxes and Customs, No. 116/35/2019-GST of 11 October 2019, clarifies that a name plate or acknowledgement thanking a donor at a charity does not attract GST when it expresses gratitude and not advertising. Do not apply it to crowdfunding or reward platforms without advice.
Reward-based campaigns raise their own question, since a backer receives something of value. Organisers should seek tax advice before selling perks.
Investments and equity-style funding
Where supporters invest in a company, the tax questions move to the company and its shareholders. In the Budget speech of 23 July 2024 the Finance Minister announced the abolition of the angel tax under Section 56(2)(viib), which had been charged at 30.9 per cent, for all classes of investors.
That announcement concerns a company’s receipt of share capital above fair value. It does not make equity crowdfunding permitted, because the securities regulator has its own position, and it says nothing about how an investor’s later gains are taxed.
Charities have their own exemptions. Approval under Form 105 preserves a non-profit’s exemptions, which is why donors and tax officers look for it. Ask a chartered accountant how returns from lending-based or profit-sharing models are taxed.
Anyone investing through an online platform should keep every contract note, platform statement and bank credit as records, because they will be needed to compute gains.
Islamic giving and tax: zakat, sadaqah and waqf
Religious motives do not change the tax rules. A donation framed as zakat or sadaqah to a charity that holds valid approval is treated like any other donation to that charity, while the same gift to a private person is a gift to an individual.
Whether a given zakat-collecting organisation holds 12A or 80G approval has to be checked with that organisation. IndiaZakat says it is 12A registered and 80G exempt, so ask it, the Zakat Foundation of India and the Human Welfare Foundation each for their certificate numbers. A donor who wants a deduction should therefore ask for the approval order.
Whether a payment qualifies as zakat is a religious ruling for a qualified scholar. Whether it qualifies for a tax deduction is a legal matter for the Income Tax Department. The two answers do not depend on each other.
Tax on crowdfunding in India: documents to keep and questions to ask
For a donor, keep the receipt, the charity’s PAN and approval details, and the bank or UPI record. Because the 2025 Act began on 1 April 2026, check which year the donation falls in and which statute therefore applies.
- Does the charity hold current approval, and can it show Form 107 and its URN?
- Does the receipt carry the charity’s details?
- Is the fundraiser a charity, an individual or a company?
- Will total gifts to the same person pass Rs 50,000 in the year?
- What do the platform’s fee table and GST lines say?
For an organiser who is an individual, record each gift with the donor’s name and amount, so that a chartered accountant can work out the threshold, and keep the bank statement showing each credit. Where the law is unclear, as for reward perks or investment returns, the right move is professional advice and not a guess.