Online Checkout charity

Hi Rishi Badraj ji,
Your query touches on multiple critical legal and compliance points under the Companies Act, 2013, CSR Rules, FCRA, and general charity governance in India — especially when a private limited company collects donations during online checkout to fund a non-profit/Foundation.

Let’s break it down clearly 👇

🧾 Scenario Summary:

• A Private Limited Company wants to:

  • Add a "Donate ₹X to support a cause" button on its e-commerce checkout page.

  • Collect this money from customers.

  • Use these funds for a charity initiative run by its own Section 8 Company/Foundation.

• Similar to Zomato + Feed India.

✅ Key Legal Questions:

🛠️ Step-by-Step Compliance Breakdown

1. ✅ Structure of Receiving Entity: Use a Section 8 Company / Registered Trust

• Donations should ideally go directly to a Section 8 Company or a Registered Trust/Society that:

  • Has 12A + 80G registration

  • (Optional) CSR-1 registration with MCA (for CSR activity)

  • Is not-for-profit and used exclusively for the charitable cause.

2. 🚫 Avoid Routing Donations through Pvt. Ltd. Company

While technically possible, routing donations via the private limited company account is not advisable, because:

• It can be misconstrued as income or business receipt.

• Raises questions under Income Tax Act and CSR misuse.

• May attract penalties if customer intent (donation) is not clearly passed through.

👉 Best practice: Route directly to the Foundation’s bank account.

3. ✅ Add Terms of Donation Clearly During Checkout

• The donation button must clearly state:

  “The ₹X you contribute will go directly to [Foundation Name], a registered not-for-profit organisation.”

• Ensure there is:

  • Voluntary opt-in (no forced inclusion)

  • Transparency of usage

  • Receipt issued to donor (if 80G applicable)

4. ✅ Comply with CSR Rules (if applicable)

If the company wants to count this as part of CSR, ensure:

• The Foundation is registered under Form CSR-1 on MCA portal.

• The CSR activity falls under Schedule VII of the Companies Act.

• The company maintains separate records for:

  • Donations received from the public

  • CSR funds spent by the company

📌 Note: Public donations cannot be claimed as CSR spending by the company. Only company's own funds spent on eligible CSR projects qualify.

5. ⚠️ FCRA Trigger: If Foreign Donations Are Accepted

If any customer paying through the donation button is a foreign national or using foreign currency, then:

• The receiving entity must have valid FCRA registration.

• Otherwise, it cannot accept foreign contributions under FCRA, 2010.

• Even one rupee from a foreign source without FCRA is illegal.

📌 Example: Zomato + Feeding India

• Zomato created a separate Section 8 company (Feeding India).

• Donation collected via checkout goes directly to the NGO.

• Zomato does not hold the donation; they act only as a tech platform.

• Receipts are issued by Feeding India (not Zomato).

• Zomato may separately contribute from its own funds for CSR.

✅ Recommended Bank Account Setup

📝 Summary Compliance Checklist

🧾 Final Advice

If your client wants a legally tight and tax-compliant model:

1. Register a Section 8 Company (if not already done)

2. Open a dedicated donation account in the NGO’s name

3. Implement clear opt-in during checkout

4. Maintain separate ledgers for:

   • Public donations

   • CSR contributions

Would you like a draft format for the donation disclaimer, or sample terms & conditions for the checkout page? I can share that too.