Yes, unless the person receiving the donation from crowdfunding is a charitable organisation, the funds are subject to income tax.
The funds raised through these platforms can be withdrawn by the individual/ organisation post the deduction of the platform fees and the GST on such fees. This net amount received after these deductions may be applicable for local government taxes is subject to income tax. Therefore, crowdfunded proceeds are taxable income in the year you receive them1.
Crowdfunding is the means of raising money from individuals for a social cause, cooperative initiative or a project and has become a popular practice for raising funds to help with the COVID situation in India. Online platforms like Millap, Wishberry and Ketto primarily follow donation-based crowdfunding where individuals donate money to support the cause. These platforms are facilitators that aid individuals and organisations raise funds. Crowdfunding is regulated by the Securities and Exchange Board of India(SEBI) and the tax treatment of donations made to such individuals/ organisations through online platforms is covered under the Income-Tax Act, 1961.
From the perspective of the person making the donation, the Income-tax Act, 1961 provides that any person donating to charitable institutions or charitable funds is eligible to claim 100% deduction of the sum paid to such institutions or funds provided the institution/ fund has a valid 80G certificate.
These platforms specify that not all donations are eligible for tax deductions. They also provide requisite information on the fundraiser page as well as in the confirmation email that you receive from them that will help you determine if your donation is eligible for tax deduction or not. If your donation is eligible for tax deduction, you will receive the 80G from the charitable institution/ fund. However, if it is not eligible for tax deduction, then you will only receive an acknowledgement for your donation.
- Section 56, Income Tax Act, 1961.
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