Legal Nature and Business Objective
Partnership firms are for-profit commercial entities; hence, they are generally not meant to raise donations like charitable trusts or NGOs.

• Donations must not contradict the firm’s commercial purpose
  
• Donations should not be used as a disguised form of income or capital
  
• Donors should not expect tax exemptions, as firms are not eligible under Section 80G
  
• Donations cannot be claimed as income voluntarily received for social work
  
• Acceptance must align with the firm’s objectives and business model
  

Income Tax Implications
Donations received by a partnership firm are treated as taxable income, unless clearly shown as capital or in-kind voluntary contributions.

• Cash or bank donations are included under “Income from Other Sources.”
  
• Proper documentation and donor details are required for transparency
  
• Large or unexplained donations may attract scrutiny or a penalty
  
• Cannot claim deduction unless the donation is routed through a registered NGO
  
• Gifts exceeding ₹50,000 (from non-relatives) are taxable under the law
  

Accounting and Financial Treatment
All receipts labeled as donations must be properly accounted for and recorded in the firm’s books.

• Entries should clearly define the nature and reason for the donation
  
• Use of donations must be disclosed in financial statements if significant
  
• Donations in kind (like equipment or goods) should be valued and recorded
  
• Auditors may question unstructured or irregular donations
  
• Unexplained credits may be treated as unaccounted income
  

Restrictions on Foreign Donations
Accepting foreign donations is heavily regulated and mostly prohibited for commercial entities.

• Partnership firms cannot receive foreign donations under the FCRA, 2010
  
• Foreign contributions must be in compliance with FEMA regulations
  
• Must not violate RBI norms on foreign remittances
  
• Prior approval may be required for inward foreign transactions
  
• Risk of legal action or penalties for unauthorized foreign funding
  

Best Practices and Legal Caution
While legally allowed in some cases, accepting donations should be done with extreme care and transparency.

• Clarify in writing whether the receipt is a gift, sponsorship, or contribution
  
• Maintain KYC of the donor and proof of voluntary nature
  
• Avoid misleading terms in business appeals or websites
  
• Consult a tax advisor before accepting large or recurring donations
  

If the intention is to operate for a social cause, consider registering a trust or society instead