What the New Tax Regime Means for Donations to Indian Non-profits

Since April 2023, India’s new income tax regime has become the default option for taxpayers. Many non-profit leaders may only now begin to see if this change has affected their organisations’ donations from individual donors.

What changed?

Under the old regime, taxpayers could claim deductions on various expenses and contributions, including donations to charitable organisations under Section 80G. This meant that a part of the money they donated reduced their taxable income.

Under the new regime, taxpayers get the benefit of lower tax rates but must give up most deductions and exemptions - including 80G. In other words, if an individual opts for the new regime, they no longer receive tax savings for donations to charitable organisations.

While this change has been in force since FY 2023-24, its effects on giving may only become visible now, as more people file returns and make financial decisions under the new rules. See table A for a comparison of the old and new regimes vis-à-vis 80G.

Type of Donation	Old Regime	New Regime
PM National Relief Fund / PM CARES Fund / other notified national funds	✅ 100% deduction allowed (no limit)	❌ No deduction
Approved NGOs / charitable trusts (most non-profits)	✅ 50% deduction allowed (subject to 10% of gross total income limit)	❌ No deduction
Certain approved institutions (scientific research, rural development, etc.)	✅ 100% or 50% deduction, depending on notification	❌ No deduction
Cash donations (above ₹2,000 in cash)	❌ Not eligible	❌ Not eligible (unchanged)
Corporate CSR spends	❌ Not covered under 80G (CSR is a statutory obligation, not voluntary donation)	❌ Not covered (unchanged)

Table A: Old vs. New Regime comparison chart for donations under Section 80G

Why does this matter for non-profits?

1. Individual giving may dip

   For many small and mid-sized donors, the 80G benefit was a tangible incentive for reduced tax burden. Without it, some may reduce the frequency or size of their contributions.

2. Institutional philanthropy is less affected

   Large domestic philanthropies, family foundations, and CSR funding do not rely on 80G for their grants. Their obligations and motivations remain the same. But NGOs that rely heavily on retail giving - monthly donors, fundraising campaigns, community drives - may feel the pinch.

3. Ripple effects for fundraising strategy

   Non-profits may need to place greater emphasis on the impact and emotional value of giving, rather than tax savings. Storytelling, transparency, and donor engagement could become even more important.

4. Potential uneven impact across the sector

   Organisations with strong cause-based or identity-based appeal may continue to attract donors, while those that leaned more on tax benefits could face sharper drops.

Philanthropic Funding Trends

The general narrative has been that the contribution of retail, HNI and UHNI donations together contributes more than 50% of private philanthropic funding in India. This move is likely to impact this narrative. (See Figure 1)

Figure 1: Philanthropic Funding Trends (Source: India Philanthropy Report 2025)

Why did the government do this?

The move is part of a broader push to create a simpler tax system with fewer exemptions, lower rates, and less scope for misuse. The government’s message seems to be that giving should be a voluntary act of social responsibility, not a tax-planning tool.

What should non-profits do?

• Watch your donor mix: Track how many of your donors are individuals, and whether their giving patterns change in the coming year.

• Adjust your messaging: Move away from highlighting “tax savings” and focus more on your mission and impact.

• Engage loyal supporters: Donors who are motivated by belief in your cause may continue giving, even without tax breaks.

Why this data matters

The new tax regime is not new, it has been effective since FY 2023-24. But It’s too early to say how big the impact will be. To understand the real consequences for the non-profit sector, we hope that the government must track and publish data on charitable giving trends under the new regime.

Without this evidence, non-profits and policymakers will be left guessing about whether critical social causes are losing out on funding.