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Contribution to NGO by company which incurred loss

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sivamnrs

21 Points Posted on 04 April 2024

An company which incurred loss for past 3 preceding financial year can make contribution to NGO?

is it permitted under companies act, 2013 or other relevant law

Replies (2)

Quick Summary

A company that has incurred losses for three consecutive financial years can still contribute to an NGO, provided certain conditions are met. While the Companies Act, 2013, generally permits such donations, specific sections like 181 require shareholder approval if the contribution exceeds 5% of average net profits (which would be nil or negative in this case). It's important to note that these donations are typically not considered business expenditure for tax purposes and may only be deductible under Section 80G if the NGO is approved.

Nikhil Kaushik

Fellow CA

70840 Points Posted on 05 April 2024

it is not restricted. however, Income-tax department keeps track of such cases. In 2023, they issued notices to thousands of donors who donated to NGOs disproportionate to their incomes.

https://economictimes.indiatimes.com/news/india/income-tax-department-sends-notices-over-donations-to-charitable-trusts/articleshow/99570518.cms?from=mdr

Aashok Kumar Sharma

Finance/Compliance Consultant

75668 Points Posted on 07 November 2026

Permitted, with limits:

• Sec 181: the Board can contribute to bona fide charitable and other funds. Prior shareholder approval (ordinary resolution) is needed if the aggregate in a FY exceeds 5% of average net profits for the 3 immediately preceding FYs. With losses in all 3 years, average net profits are negative or nil, so any contribution exceeds 5% and needs shareholder approval.

• CSR (Sec 135) doesn't apply if the CSR thresholds aren't met. Voluntary donations aren't CSR spending.

• Income-tax: donations are deductible only under 80G (if the NGO has 80G approval, 50% or 100% as applicable). A company under the 115BAA regime can't claim 80G. Not deductible under Sec 37 (not business expenditure).

• Political contributions: Sec 182 requires 3 years' existence, and since the SC struck down electoral bonds (2024), contributions go through the bank route with disclosure.