All You Need To Know About Crowdfunding In India

Crowdfunding has been one of the most common and effective ways of raising funds. Be it for a new business venture or to call out to people to support a cause, crowdfunding has been an effective way of raising funds by appealing to the good nature of the public. And recently, the method has gained immense traction in India as well.

Growth of crowdfunding in India

Crowdfunding has been on the rise in India for a decade. Assessing the efficiency with which one can raise money and how the public can be associated with positive causes, it is no wonder that crowdfunding is being used extensively for multiple purposes. Primarily, a majority of the crowdfunding platforms are being used to raise money for philanthropic purposes, with some websites observing return donor percentages having increased by 40% in just two years. Furthermore, with the constant addition of new crowdfunding platforms, such as Donatekart, among many others, there are many avenues for people seeking funds to raise the necessary money over the internet.

Different types of crowdfunding

Donation seekers in India use various crowdfunding platforms to raise donations in multiple ways. And depending on the purpose of the fundraiser campaign, the type of crowdfunding being used also changes. These are the most common crowdfunding methods used by donation seekers in India:

Donation-based Crowdfunding

Donation-based crowdfunding is probably the most common type observed in India at the moment. Most often used for philanthropic causes, such as campaigns for helping the poor and needy or to fund the treatment of a dear one, this type has seen the highest engagement amongst Indian donors. Especially during the pandemic, many sympathetic philanthropists used crowdfunding platforms to contribute to public welfare.

Debt-based Crowdfunding

This method works much like the normal way of borrowing money from others, and it works just like how you would accrue debt by borrowing a sum from someone with the promise to pay it back with a predetermined interest. Debt-based crowdfunding works on the same principle by allowing the donation seeker to collect money in exchange for interest charges predetermined by them. This is most effective and common for raising seed money for a new venture or other business-related purpose. The donation seekers intend to return the money to the donors.

Reward-based Crowdfunding

Lastly, reward-based crowdfunding is another method primarily used for raising seed money. In this method, the donation seekers offer rewards to donors in exchange for their donation, providing the donors with exclusive complimentary services in exchange for their monetary support. This is also great because it helps promote the service among the donors (investors).

Is crowdfunding legal in India?

Crowdfunding is very much legal in India, albeit with few restrictions. Especially in the case of donation-based crowdfunding, most platforms provide instant tax benefits to donors.

Role of crowdfunding in India today

Crowdfunding in India has taken a much better stance than it did in the past. With greater assurance and tax benefits, it compels more people to donate more regularly. Furthermore, the trend has increased exponentially due to online donations amid COVID-19. In this regard, crowdfunding can be considered one of the most widely-used methods of raising money nowadays in India, regardless of the purpose.

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