Section 35AC of the Income Tax Act was a special provision that allowed donors to claim 100% tax deduction on donations made to approved social and economic welfare projects. Approval under Section 35AC was granted by the National Committee for Promotion of Social and Economic Welfare (NCPSEW) under the Central Government.
In this Saving Mantra guide, we explain what 35AC is, its purpose, and the step-by-step process to apply for 35AC in India, along with eligibility, documents, and important compliance notes.
What is Section 35AC?
Section 35AC provided tax incentives to encourage funding of projects related to:
- Poverty alleviation
- Education and skill development
- Healthcare and sanitation
- Rural development
- Social and economic welfare
Donations made to approved institutions/projects were eligible for 100% deduction for donors.
Important Update on Section 35AC
⚠️ Key Note:
Section 35AC benefits were withdrawn by the Government of India with effect from Assessment Year 2018–19 onwards.
- New approvals under Section 35AC are no longer granted
- Existing approvals were valid only up to their approved period
However, understanding 35AC remains relevant for legacy compliance, audits, and historical tax matters, and for institutions transitioning to other benefit sections like 80G.
Who Was Eligible to Apply for 35AC Approval?
Earlier, the following entities could apply:
- Registered Trusts
- Registered Societies
- Section 8 Companies
- Institutions engaged in approved welfare activities
Conditions included:
- Non-profit motive
- Proper registration and governance
- Transparent accounting and audits
Benefits of 35AC Approval (Earlier)
For Donors
- 100% tax deduction on donation amount
- No maximum limit on deduction
For Institutions
- Increased donor confidence
- Access to large corporate and institutional funding
- Government-recognized welfare status
Step-by-Step Process to Apply for 35AC in India (Earlier Process)
Step 1: Legal Registration of Entity
The applicant had to be a registered Trust, Society, or Section 8 Company.
Step 2: Prepare Welfare Project Proposal
A detailed project report was prepared covering:
- Objectives and social impact
- Area of operation
- Budget and funding requirement
- Implementation timeline
Step 3: Compile Required Documents
All statutory, financial, and project-related documents were prepared.
Step 4: Application to National Committee
Application was submitted to the National Committee for Promotion of Social and Economic Welfare, Ministry of Finance.
Step 5: Scrutiny & Evaluation
The committee evaluated:
- Genuineness of activities
- Social impact of the project
- Financial transparency and governance
Step 6: Grant of 35AC Approval
Upon satisfaction, the project/institution was notified and published in the Official Gazette.
Documents Required for 35AC Application (Earlier)
- Registration certificate (Trust/Society/Section 8)
- MOA/Trust Deed/Bye-laws
- Audited financial statements
- Detailed project report
- PAN Card of institution
- Activity reports and photographs
- Board/Trustee resolution
Post-Approval Compliance (Earlier)
- Utilization of funds strictly for approved projects
- Maintenance of separate books of accounts
- Periodic reporting to authorities
- Proper issuance of donation receipts
Current Alternatives to Section 35AC
Since 35AC is discontinued, NGOs now opt for:
- Section 80G Registration (donor tax deduction)
- 12A / 12AB Registration (income tax exemption)
- CSR funding under Companies Act
- Government and international grants
Why Choose Saving Mantra for NGO & Tax Benefit Advisory?
- Expert guidance on legacy 35AC matters
- Assistance with 12A & 80G registrations
- NGO structuring and compliance support
- Transparent and professional advisory services
Conclusion
Section 35AC played a significant role in promoting social and economic welfare projects in India by incentivizing donors with full tax deduction. Although new 35AC approvals are no longer available, understanding its framework is important for historical compliance and for NGOs transitioning to current tax benefit provisions. Saving Mantra provides expert guidance on NGO registrations, tax exemptions, and compliant funding structures.
Disclaimer
The information provided in this blog is for general informational purposes only and does not constitute legal or tax advice. Section 35AC benefits have been withdrawn from Assessment Year 2018–19 onwards, and no new approvals are granted. Laws, rules, and tax provisions are subject to change. Readers are advised to consult qualified professionals for current and applicable tax benefit registrations in India.