Corpus Donation and Deemed Corpus Donation: Rules for Trusts under the Income Tax Act 2025

A corpus donation is a gift to a registered non-profit organisation that the donor specifically directs to form part of the organisation's corpus (its permanent fund). Under section 339 of the Income-tax Act, 2025, it counts only if the organisation invests or deposits it in a permitted mode under section 350, in an account or holding kept specifically for that corpus. If it qualifies, section 338(b) keeps it out of the organisation's regular income. Section 340 adds a separate option: donations for renovating or repairing a notified temple, mosque, gurudwara, church or similar place can be treated as deemed corpus, subject to four conditions.

This guide explains both provisions, the investment rule that holds them together, what the Income-tax Rules, 2026 require you to record, and what happens if a condition is broken. Every point is taken from the Act (as amended by the Finance Act, 2026) and the Rules, with the section number alongside. Last reviewed against that text on 10 November 2026.

What is a corpus donation under the Income-tax Act, 2025?

Section 339 defines it in one sentence. A corpus donation is any donation made with a specific direction by the donor that it shall form part of the corpus of the registered non-profit organisation, provided the donation is invested or deposited in a mode permitted under section 350, maintained specifically for such corpus.

So there are two tests, and both must be met:

1. The donor's direction. The gift must come with a specific direction that it forms part of the corpus. A general donation that the trustees later decide to treat as corpus does not meet the wording of section 339.
2. The organisation's follow-through. The money must actually be invested or deposited in a section 350 mode, kept specifically for corpus.

"Registered non-profit organisation" is the term the 2025 Act uses for a trust, society or similar body registered for charitable or religious purposes. If you need the registration rules first, read our guide on registration of trusts and non-profit organisations under the Income Tax Act 2025.

What is the tax benefit of a corpus donation?

Section 338(b) says that, when computing the regular income of a registered non-profit organisation, "the corpus donation received by the registered non-profit organisation under section 339" is not included. Regular income is the base on which the organisation's application of income is tested. The 85% test in section 341(5) works against regular income, so a qualifying corpus donation does not increase the amount the organisation has to apply.

The benefit is conditional, which is why the investment rule below matters so much.

Which investments are permitted for corpus?

Section 350(1) says the permitted modes are those specified in Schedule XVI. Under section 350(2), the Central Government can notify further modes by notification. Schedule XVI, paragraph 1, lists 32 items. The ones most trusts use are:

Schedule XVI item	Mode
(1)	Savings certificates and other Central Government small savings securities or certificates
(2)	Deposit in any account with the Post Office Savings Bank
(3)	Deposit in any account with a scheduled bank or a co-operative society carrying on banking business
(5)	Investment in a security for money created and issued by the Central Government or a State Government
(11)	Investment in immovable property
(13)	Units of a mutual fund scheme referred to in Schedule VII (Table: Sl. No. 20 or 21)

The full list also covers items such as units of the Unit Trust of India, bonds of specified financial corporations, public sector company shares and sovereign gold bonds. Read the schedule itself before putting corpus into anything outside the table above. Paragraph 1(31) is a short-term allowance: an asset outside items (1) to (30) is tolerated only for up to one year from the end of the tax year in which it was acquired. If it is still held after that, section 337 (Table Sl. No. 12) makes its fair market value specified income.

What is a deemed corpus donation under section 340?

Section 340 is a narrow provision for religious places. It applies where the property of a registered non-profit organisation includes a temple, mosque, gurudwara, church or other place notified under section 133(1)(b)(vi). Under that clause the Central Government notifies a place as being of historic, archaeological or artistic importance, or a place of public worship of renown throughout a State or States.

Any sum or sums the organisation receives as donation for the renovation or repair of that place may, at its option, be deemed to form part of the corpus under section 339. Two things stand out:

• It is the organisation's option. Nothing is automatic.
• The donor does not have to give a corpus direction. That is the difference from section 339. The section 340 route is available because the purpose is renovation or repair of a notified place.

The four conditions in section 340

The deemed corpus treatment holds only if the organisation:

• (a) maintains the corpus as separately identifiable;
• (b) applies the corpus only for the purpose for which the donation was made;
• (c) invests or deposits the corpus in a mode permitted under section 350; and
• (d) does not apply the corpus for making a donation to any person.

How do I know which route applies? A decision chart

How does a corpus donation work in numbers? Worked examples

Example 1: corpus excluded, ordinary income tested at 85%

Assumptions: Shanti Education Trust is a registered non-profit organisation. In tax year 2026-27 it receives Rs 40,00,000 of ordinary voluntary contributions and fees. For illustration, treat this as its regular income. It also receives Rs 25,00,000 from a donor who writes that the amount is for the trust's corpus. The trust puts the Rs 25,00,000 into a fixed deposit with a scheduled bank (Schedule XVI, paragraph 1(3)) in a separate account used only for corpus.

Step	Working	Rs
1. Total receipts	40,00,000 + 25,00,000	65,00,000
2. Corpus donation excluded (section 338(b))	Both tests of section 339 met	(25,00,000)
3. Regular income (illustrative)	65,00,000 - 25,00,000	40,00,000
4. 85% of regular income (section 341(5))	40,00,000 x 85%	34,00,000
5. Income applied to charitable purposes in India	Assumed	30,00,000
6. Shortfall against 85%	34,00,000 - 30,00,000	4,00,000

The Rs 25,00,000 does not enter the 85% base. The shortfall of Rs 4,00,000 may, at the trust's option, be treated as deemed application under section 341(5). Under section 341(6)(b) that amount must then be applied for the trust's objects in India in the immediately succeeding tax year (for a shortfall that arises for a reason other than income not yet received). The option under section 341(7) is exercised on or before the due date for the return under section 263(1), in the prescribed form and manner. This is a simplified illustration. Real regular income is computed under the wider rules for registered non-profit organisations.

Example 2: spending from corpus and putting it back

Assumptions: the same trust spends Rs 10,00,000 out of its corpus deposit in tax year 2026-27 to meet a classroom expense, and replaces it later.

1. Under section 341(4), an application from corpus is not treated as application of income. So the Rs 10,00,000 does not help the trust meet its 85% requirement in 2026-27.
2. Under section 341(2)(a), the amount invested or deposited back in a section 350 mode, maintained specifically for corpus, is included in application of income for the year it is put back, if it is put back within five years from the end of the tax year in which the corpus was used, the application was made after 31 March 2021, and there was no violation of the Part.
3. If the trust deposits Rs 10,00,000 back in 2028-29, that is within five years of the end of 2026-27. The Rs 10,00,000 counts as application of income in 2028-29, provided the conditions in section 341(2)(a) hold.

Rule 187(1)(d)(v)(X) asks the trust to record exactly this: the amount deposited back into a donation that was applied in an earlier tax year and not claimed as application, with the section 350 mode used.

Real-life examples

Meena gives to a hospital trust

Meena sends Rs 5,00,000 to a charitable hospital trust with a letter saying it is for the trust's permanent corpus fund. The trust keeps the letter, opens a separate deposit with a scheduled bank for corpus, and records Meena's name, address and PAN (if available) as rule 187(1)(d)(v)(I) requires. This is a section 339 corpus donation: direction by the donor, plus a permitted mode kept for corpus. If the trust had instead merged the money into its day-to-day account, the second test would be at risk.

Ravi and the temple trust

A temple trust holds a temple that the Central Government has notified under section 133(1)(b)(vi). Ravi and other devotees give Rs 8,00,000 for repair of the temple roof, with no corpus direction. The trust chooses the section 340 option, keeps the Rs 8,00,000 in a separate deposit with a scheduled bank, and spends it only on the roof. All four conditions are met. Had the trust given Rs 2,00,000 of that fund as a donation to another trust, condition (d) would be broken.

What happens if a condition is broken?

Section 337 lists "specified income" of a registered non-profit organisation, and two of its Table entries apply here:

Sl. No. in section 337	What triggers it	Taxable in
4	Any investment or deposit made in contravention of section 350, out of any income, accumulated income, deemed accumulated income, corpus, deemed corpus or any other fund	Tax year in which the investment or deposit is made
5	Any deemed corpus donation where any of the conditions in section 340 is violated	Tax year in which the violation is made

Section 353(2) says that specified income and residual income are chargeable to tax under section 334, irrespective of section 338. This is why a deemed corpus donation that fails its conditions can end up taxable. For the organisation in the Ravi example, the Rs 8,00,000 would be specified income in the tax year of the violation. The tax rate is not covered in this guide, so check section 334 for the rate and computation before advising a client.

What records must the organisation keep?

Rule 187 of the Income-tax Rules, 2026 sets out the books and documents a registered non-profit organisation must keep (where section 347 requires books). Two clauses are specific to this topic:

• Rule 187(1)(d)(v): records of donations made with a specific direction to form part of the corpus. It covers donor name, address, PAN and Aadhaar (if available), the application out of the donation, amounts credited or paid towards corpus to another registered non-profit organisation, and the section 350 forms and modes in which the money is held. It does this for the current year and for earlier years.
• Rule 187(1)(d)(vi): the same type of record for donations received for renovation or repair of a notified place that are treated as corpus under section 340, including donations of earlier years treated as corpus in the current year.

Under rule 187(5), books and documents are kept for six years from the end of the relevant tax year. If an assessment is reopened under section 279 within the period in section 282, they must be kept until the reopened assessment becomes final (rule 187(6)). Under rule 187(3) they are kept at the registered office, or at another place in India decided by a management resolution, with written intimation to the jurisdictional Assessing Officer within seven days (rule 187(4)).

Quick reference

	Corpus donation (section 339)	Deemed corpus donation (section 340)
Who decides	Donor gives a specific direction	The organisation, at its option
What qualifies	Any donation with the corpus direction	Donation for renovation or repair of a notified place the organisation owns
Investment rule	Section 350 mode, kept specifically for corpus	Section 350 mode
Other conditions	None beyond the two tests	Separately identifiable; used only for the donation's purpose; not given away as a donation
Effect	Excluded from regular income (section 338(b))	Treated as corpus under section 339
If broken	Investment outside section 350 is specified income (Sl. No. 4)	Specified income (Sl. No. 5)
Records	Rule 187(1)(d)(v)	Rule 187(1)(d)(vi)

Can a trust pass corpus on to another trust?

A trust that moves money to another registered non-profit organisation should keep two different rules apart:

• Ordinary donation to another registered non-profit organisation: section 341(1)(b) allows 85% of the sum as application of income.
• Sum paid as a corpus donation to another registered non-profit organisation: section 341(3)(c) says it is not allowed as application of income.

Also, section 341(4) says an application from corpus is not application of income at all. So a trust gains nothing for its 85% test by sending corpus onward, and for deemed corpus under section 340, condition (d) bars the onward donation. Rule 187(1)(d)(v)(III) and (VII) still ask the donor trust to record such payments, so keep the paperwork.

Common mistakes

• Treating a general donation as corpus. Section 339 needs the donor's specific direction. A board resolution after the money arrives does not supply it.
• Not keeping the corpus separate. Both sections speak of money maintained specifically for corpus (section 339) or as separately identifiable (section 340(a)). Mixing it into the operating account weakens the claim.
• Choosing an investment outside Schedule XVI. It makes the investment specified income under section 337 (Sl. No. 4) for the year it was made.
• Counting corpus spent as application of income. Section 341(4) rules it out. It counts only if put back as section 341(2)(a) describes.
• Passing deemed corpus on to another trust. Condition (d) of section 340 bars any donation out of that corpus.
• Weak donor records. Rule 187 asks for donor name, address, PAN and Aadhaar where available, for each corpus and deemed corpus donation.

Where this is in the Act

• Section 339: corpus donation
• Section 340: deemed corpus donation (cross-refers to section 133(1)(b)(vi))
• Section 338(b): corpus donation excluded from regular income
• Section 350 and Schedule XVI: permitted modes of investment or deposit
• Section 337, Table Sl. Nos. 4 and 5: specified income on breach
• Section 341(2)(a), (4), (5): corpus put back, corpus not counted as application, 85% test
• Section 353(2): specified income chargeable under section 334
• Rule 187(1)(d)(v), (vi), and rule 187(5): corpus records and retention period

How do CA firms keep track of corpus for trust clients?

For a CA who looks after several trusts and societies, the difficulty is not the definition. It is knowing, for each client, which donations carried a corpus direction, where each corpus deposit sits, and which year a spent amount must be put back by. Finexo's practice management software lets you track client-wise tasks and deadlines, such as the five-year replacement window, and set reminders. It does not compute the tax or file anything for you.

Donors also ask about their side of the transaction. See our guide on donation deduction rates and limits under the Income Tax Act 2025. Section 133(1)(b)(vi) is the clause for donations towards renovation or repair of notified places.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.