TaxSaral
Section 339Charitable Trusts & NPOswas Section 11 in IT Act 1961

Corpus Donations — Permanent Fund Contributions

A corpus donation is a voluntary contribution made to a registered NPO with a specific written direction from the donor that it should form part of the 'corpus' (permanent fund) of the trust. Such donations are excluded from regular income and are not subject to the 85% application test — they must be kept invested in permitted modes.

Who this applies to

Registered NPOs receiving contributions that donors specifically designate as corpus (permanent endowment) in writing.

Key Points

  • Must have a WRITTEN direction from the donor specifying it as 'corpus' — oral directions are not valid
  • Corpus donations are excluded from regular income and NOT subject to the 85% application requirement
  • Must be invested only in the permitted modes specified in Section 350
  • Income earned ON corpus investments (interest, rent) IS regular income subject to the 85% test
  • Corpus cannot be spent on day-to-day charitable activities — it must be maintained as permanent capital
  • Misuse of corpus (spending on non-corpus purposes) triggers taxability at MMR

Worked Example

1

Building a Corpus Fund for Scholarships

Scenario

An alumnus donates ₹1 crore to his college alumni charitable trust with a written letter: 'This donation is specifically for the trust's permanent corpus fund to generate income for student scholarships.'

Calculation

Corpus donation received:              ₹1,00,00,000
Written direction provided:            ✓

Treatment:
  Included in regular income?           NO
  Subject to 85% application test?      NO
  Taxable as donation received?         NO
  Must be invested in:                  Section 350 permitted modes

Investment: Nationalised bank FD @ 7%
Interest earned annually:              ₹   7,00,000
  → This IS regular income → Subject to 85% rule
  Required application (85%):          ₹   5,95,000 to scholarships

Result

The ₹1 crore corpus is protected permanently. Each year ₹7 lakh in interest is generated, of which ₹5.95 lakh must go to scholarships. The corpus itself never needs to be spent.

Related Sections

Section 340Deemed Corpus Donations
Section 338Income Excluded from Regular Income of an NPO
Section 350Permitted Modes of Investment for Charitable Trusts
Section 335Regular Income of Registered NPO — The Exemption Provision

Still have questions about Section 339?

Our tax team can explain how this provision applies to your specific situation.

Ask our tax teamBrowse all sections

Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.