-Name withheld on request
When you make a donation to the German Red Cross, there is no tax liability in India merely for contributing to the organisation. However, such a donation will not qualify for a tax deduction in India since the German Red Cross is established abroad and is not registered under Indian law for charitable purposes.
The deeming rule
Under Indian tax law, a deeming provision treats any payment by a resident to a non-resident, made without consideration, as income deemed to accrue or arise in India in the hands of the non-resident.
This rule excludes payments made to charitable entities that are registered and approved in India under the Income Tax Act, 1961. Since the German Red Cross is a foreign charity, the exclusion may not apply in this case.
As a result, the donation could be treated as income without consideration and deemed to accrue in India in the hands of the German Red Cross.
Consequently, you may be required to deduct tax at source (TDS) on the donation. Such income would fall under the head “Income from Other Sources.”
The German Red Cross, being an unregistered non-profit, would likely be regarded as an association of persons (AOP) for Indian tax purposes. The standard TDS rate in such cases is 30% plus applicable surcharge and cess.
Relief under the India-Germany DTAA
However, the German Red Cross may seek relief under the India–Germany Double Taxation Avoidance Agreement (DTAA), provided it qualifies as a tax resident of Germany.
Since the organisation is governed by the German Federal Tax Code and enjoys exemption from corporate tax, it can be treated as a resident of Germany for DTAA purposes.
Under the treaty, such income typically falls under the “Other Income” article, granting Germany exclusive taxing rights. Therefore, if the German Red Cross furnishes a Tax Residency Certificate (TRC) and Form 10F, the donation would be taxable only in Germany, and no TDS would be required in India.
However, since the donation qualifies as a remittance under the Liberalised Remittance Scheme (LRS), the provisions of Tax Collected at Source (TCS) will apply.
If TDS is applicable and has been deducted, TCS is not levied. But in this case, since TDS may not apply due to DTAA relief, TCS would become applicable.
TCS under LRS applies only to total remittances exceeding ₹10 lakh in a financial year per PAN (excluding overseas tour packages). Your authorised dealer (AD) bank would collect TCS at 20% on the amount exceeding this threshold.
Any TCS paid can later be claimed as credit when filing your income tax return for FY 2025–26.
Harshal Bhuta is partner at P. R. Bhuta & Co. CAs
