35 AC

Section 35AC of the Income Tax Act, 1961 is one of the key provisions which is relevant for raising resources for NGOs if understood and used effectively.


The objective of above provision is to encourage business organisations to contribute more in social and economic welfare and upliftment of general public.

NGOs involved in eligible projects notified by the Central Government for promoting the social and

economic welfare can raise resources for eligible project from corporate sector and fulfil their objective of development.

Section 35AC


Section 35AC provides that where a person or a company incurs any expenditure by way of payments of any sum to:

(i) A public sector company or;

(ii) A local authority or;

(iii) To an association or institution approved by the National Committee

for carrying out any eligible project or scheme for promoting the social. and economic welfare or upliftment of the public as the Central Government may specify, then the amount so paid shall be allowed as deduction from the business income of the assessee/ contributor of such amount.

Eligible persons to make contributions


Persons eligible to make contributions include:

(i)   an individual;

(ii)   a Hindu Undivided family;

(iii)  a Company;

(iv)  a firm;

(v)  an Association of persons or a Body of Individuals, whether incorporated or not;

(vi) a local authority;

(vii) every artificial juridical person not falling within any of the preceding sub-clauses.

The Section 35AC of the Income Tax Act, 1961 allows deduction from the business income of the assessee on payments made to eligible organisations.

Eligible persons to receive contributions


The following organisations can receive contributions:

(i)     a public sector company or;

(ii)    a local authority or;

(iii)   an association or institution approved by the National Committee.

 In view of NGOs, the third clause, an approved association or institution by National Committee is of importance as NGOs generally will fall in the purview of this clause and in order to receive funding or contribution has to follow the guidelines prescribed under rule 11J of The Income Tax Rules to carry out any eligible project or scheme.

Section 35AC though infrequently used as compared to Section 80G of the Income Tax Act, can become a potent tool in the hands of the NGOs for mobilisation of financial resources if used effectively.

 Section 35AC can build a linkage between corporate sector and the NGO sector in terms

of raising of resources and its utilisation in socially relevant projects. Procedurally also it seems less

cluttered than the other provisions like 80G, hence it is advisable to use this section by persuading Companies to contribute towards socially relevant project through section 35AC.