New Income Tax Act 2025 and Income Tax Rules 2026 for nonprofits for understanding and orientation of the new tax law | Part 11 of 15

Sharad · May 14, 2026, 9:26am

Part 1: Income Tax Act 2025 for nonprofits/charitable institutions

Recap of Provisions in Income Tax Act 1961 for charitable institutions

Readers may note familiarity with the following chapters and sections of the Income Tax Act 1961 which has been repealed from 1.4.2026 and replaced with Income Tax Act 2026.

Chapter I-Section 2(15) Definition of charitable purpose
Chapter III: Incomes which do not form part of total income

Sections 11-13 (including section 10(23C approval entities)
Section 11-Income from property held for charitable or religious purpose
Section 12-Income of trusts from contributions-12A (conditions for applicability of section 11-12) and 12AB (Procedure for regis tration)
Section 13-Section 11 not to apply in cert ain cases

Chapter VI-A-80G-Deduction in respect of donations to certain funds, charitable instit utions etc
Chapter XII-Section 115BBC Taxation of Anonymous donations 115BBI Specified income of certain i nstitutions
Chapter XIIB-Section 115TD-115TF Exit tax on accreted income of charitable institutions
Chapter XVII-B-TDS provisions, Chapter XIV for Procedure for Assessment, Other scattered sections under var ious chapters

The above chapters and sections no longer apply from 1.4.2026

Why the need to replace Income Tax Act 1961 with Income Tax Act 2025

The Challenges in Income Tax Act 1961 for charitable institutions were

a. Provisions spread across several chapters for charitable institutions

b. Law has evolved over time

c. Provisos and explanations inserted over time make understanding difficult

Resolution to above Challenges has been brought through Consolidation of all provisions applicable to non profits in a single chapter called Chapter XVII-Special Provisions related to Certain Persons Part B-Special Provisions for Registered NPOs in Income Tax Act 2025.

In addition, use of uniform terms for consistency and simplified language for clear understanding has been made. Tables, Schedules and definitions (interpretation) provided in all Chapters and Provisos and explanations have been deleted completely.

So how are income tax provisions for charitable institutions structured in Income Tax Act 2025?

Chapter XVII-B (Special Provisions for Registered NPO) has all provisions related to charitable institutions and is divided in seven structured subparts (Sections 332-355)

Registration-Sections 332-333
Income of registered NPO-Sections 334-343
Commercial Activities by RNPO–sections 344-346
Compliances-sections 347-350
Violations-sections 351-353
Approval for purpose of deduction under section 133(1)(b)(ii)-Section 354
Interpretation–Section 355

Part 2 of 15

As we saw yesterday, the income tax provisions for charitable institutions have been structured in 7 neatly organised sub parts in Income Tax Act 2025. Let us do sub part 1 today. This sub part is regarding Registration of charitable institution for income tax exemption. But before that let us see some definitions

Please note that if you are registered as an exempt entity under income tax you will be called as ‘Registered Non Profit Organization (RNPO)’ from 1.4.2026. The Income Tax Act will call you as RNPO only always henceforth. Remember this acronym. But what is a Registered Non Profit Organization (RNPO)?

The Act defines “Registered non-profit organization” as any person having a valid registration under any specified provision and such registration has not been cancelled

So, if you are person with valid registration under any specified provisions of Income Tax Act 1961 or 2025 and it has not been cancelled, your organisation is an RNPO. If the NGO has valid registration no action is required at this stage.

Two more definitions

“Charitable Purpose” Section 2(23) of Income Tax Act defines it to include–

Relief of the poor;
education;
yoga;
medical relief;
preservation of environment (including watersheds, forests and wildlife);
preservation of monuments or places or objects of artistic or historic interest;
the advancement of any other object of general public utility;

The proviso to limb g above has been removed whereas the definition is same as Section 2(15) of Income Tax Act 1961. Religious purpose has not been defined as was in ITA 1961

Tax Year means twelve months period of the financial year commencing on 1st April of such financial year

The Department has done away with Previous Year (PY) and Assessment Year (AY) completely from 1.4.2026 which used to confuse us so much.

Now let us do sub part 1 of Chapter XVII-B which deals with Registration

Registration (Sections 332-333) of Income Tax Act 2025

Section 332-Application for Registration- following persons (called registered non-profit organization) for claiming benefits under this Part, make an application for registration to P/CIT-

a. a public trust;

b. a society registered under the Societies Registration Act, 1860, or under any law in force

c. a company registered under section 8/25 of the Companies Act, 2013/1956

d. a University/ educational institution affiliated thereto or recognized by Govt

e. an institution financed wholly/partly by Government/local authority;

f. any person as referred to in

Schedule III-Income not to be included in total income of eligible persons (Table: Sl. No. 27) to (Table: Sl. No. 29) i.e. contribution to IPF setup by SE, CE and Depository and (Table: Sl. No. 36) i.e. section 10(46) i.e. entities created by central/state govt and notified by central govt for benefit of general public other than Sch VII Table sl 42 and

Schedule VII Persons exempt from Tax (Table: Sl. No. 10-16) PMNRF, PMCARES, SBM ,Clean Ganga, CM Relief Fund etc-deleted in Budget 2026, Table Sl 17-any University/edu institution substantially/wholly financed by Govt, Table Sl 18- any medical institution wholly/substantially financed by Govt and Table, Sl 19-any educational or medical institution with gross receipts upto Rs. 5 cr.PA, Table: Sl. No. 42-any body/authority setup by Central/State Act for housing, development of cities, village, regulating activity for benefit of general public; or

g. any other person notified by CBDT

Below are types of registration/approval for RNPO under ITA 2025

Table- 332-cases, time limit for application, approval by Dept and validity of registration

Sl. No.	Case	Time limit for furnishing application	Time limit for passing order	Validity of registration
1	Where the activities of the applicant have not commenced and it has not been registered under any specified provision at any time before making the application.	At any time during the tax year beginning from which registration is sought.	One month from the end of the month in which application is made.	Three tax years commencing from the tax year in which such application is made.
2	Where the activities of the applicant have commenced and it has not been registered under any specified provision at any time before making the application.	At any time during the tax year, beginning from which registration is sought.	Six months from the end of the quarter in which application is made.	Five tax years commencing from the tax year in which such application is made.
3	Where the applicant has been granted provisional registration and activities have commenced.	Within six months of the commencement of activities.	Six months from the end of the quarter in which application is made.	Five tax years commencing from the tax year in which such application is made.
4	Where the provisional registration of the applicant is due to expire and activities have not commenced.	At least six months prior to the expiry of the provisional registration.	Six months from the end of the quarter in which application is made.	Five tax years following the tax year in which such application is made.
5	Where the registration of the applicant is due to expire, other than cases mentioned at serial number 4.	At least six months prior to the expiry of the registration.	Six months from the end of the quarter in which application is made.	Five tax years following the tax year in which such application is made.
6	Where the registration of the applicant has become inoperative due to switching over of regime under Section 333	At any time during the tax year beginning from which the registration is sought to be made operative.	Six months from the end of the quarter in which application is made.	Five tax years commencing from the tax year in which such application is made.
7	Where the applicant, being a registered NPO has adopted or undertaken modification of its objects which do not conform to the conditions of registration.	Within thirty days of the date of such adoption or modification	Six months from the end of the quarter in which application is made.	Five tax years commencing from commencement of the tax year in which such application is made.

So, all possible cases of registration/approval/renewal etc will fall in one or the other serial no in above table.

Conditions for registration

Person must be constituted/registered/incorporated for charitable purpose under (2(23) or public religious purposes
Properties held under an irrevocable trust for benefit of public wholly for charitable/religious purpose

Condonation for delay in filing registration application by P/CIT with reasonable cause for delay in registration application
Accreted tax if condonation is not granted in cases for Table sl. No 3,4,5,7 (3. conversion of provisional regn, 4. renewal of provisional 5. renewal of regular regn and 7. modification of objects)
If income in past 2 tax years prior to application is upto Rs. 5 cr, registration granted for 10 years-applicable to cases in Table sl. 3 to 7
For cases in Table sl. No. 2-7, P/CIT see gaminess and compliance with other laws and grant/reject registration (after giving opportunity of being heard in case of rejection)
Provisional registration granted by P/CIT only

The above are provisions relating to Registration of RNPO. Please raise your queries on today’s post on Forum.

Tommorow, we will understand the provisions of sub part 2 of Chapter VII-B i.e. Income of RNPO.

See you tomorrow.

CS Sharad Bhargava

Sharad · May 15, 2026, 4:45am

Part 3 of Part 15

Welcome to Part 3 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will share sub part 3 of Chapter XVIII-B of Income Tax Act 2025. Remember the title of this Chapter is “Special Provisions for Registered NPOs” and that we are called Registered Non-Profit Organisation as per Income Tax Act from 1st April.

Sub Part 3 of Chapter XVII-B-Income of registered NPO-Sections 334-343

This sub part deals with Income and Application of RNPOs and is the biggest sub part in the Chapter. It includes all matters relating to income, application and accumulation of income of an RNPO.

Section 334-Tax on income of RNPO-Income tax on total income for a tax year will be (a) @30% on specified income (a) at the rate applicable on taxable regular income

This section tells an RNPO like us that tax will be @30% if the income is categorized as Specified Income as per Section 337 and at slab rates for income left after applying 85% application rule.

Section 335-Regular income includes-(a) receipts from charitable or religious activity for which registered (b) capital/revenue receipts from property/investment held (c) voluntary contribution (d) gains from commercial activity received in tax yea r

This section tells an RNPO that income tax law recognizes 4 types of income, and the law now specifies receipts from charitable/religious activity for which RNPO is registered which was not explicit in the erstwhile Income Tax Act 1961. This means that if you are an educational institution, the tuition fees is receipts from charitable activity of education which you must have selected while filing Form 10A or 10AB for registration or renewal for tax exemption .

Section 336-Taxable regular income is (a) nil if 85% or more of income in tax year applied or accumulated as per 342 (b) 85% regular income less application and accumulat ion

This section tells an RNPO that if 85% or more of the income is applied, there is nil tax but tax on regular income at slab rates will apply if the 85% rule both in terms of application and accumulation is not fulfill ed.

Section 337-Specififed income-taxable in same tax year (except h where it is last year)

(a) Anonymous donation (excludes religious/charitable cum religious except for an educational/medical institution)-Rs.1 lakh or 5% of donations whichever is higher

(b) Income applied for benefit of a related person

(c) Income applied outside India in contravention of Sectio n 338(a)

(d) Investment of any income, deemed accumulated income, accumulated income, corpus, deemed corpus or any other fund in violation of 350

(e) Deemed corpus donation for violation of conditions in 340 (donation for repair of religio us places)

(f) Accumulated income applied for purpose other than for which accumulated

(g) Accumulated income ceases to be accumulated (conditions not fulfilled)

(h) Accumulated income not applied within prescribed period-342(1)

(i) Accumulated income paid to another registered NPO

(j) Income applied for other than charitable or religious purpose for which registered

(k) Income determined by AO more than income as shown for business undertaking

(l) Fair market value of asset not held in modes under Schedule XVI after expiry of 1 year from end of tax year in which acquired

(m) Deemed application not applied within allowed timeline

This section tells an RNPO situations in which income received or applied will attract 30% taxation due to the relevant violations. What is very important is that an RNPO like you must recognise that your do not fall under any of the situations i.e.a-m above otherwise the income received or utilised will be taxed at 30% flat and not at slab rate.

Section 338-Income not to be included in regular income-

(a) income applied outside India approved by CBDT to promote international welfare in which India is interested and

(b) corpus donation received by RNPO

This section tells an RNPO that two types of income will not form part of regular income, one, when income is applied outside India with CBDT approval and CBDT will approve if income is applied to promote international welfare in which India is interested which is a new addition in the Act. Second, corpus donation as we know is a capital receipt and is not included in income provided it fulfils all conditions required to be considered corpus.

Section 339-Corpus donation-donation made with specific direction by donor to treat as corpus and invested in permitted modes of investment under section 350

This section tells the RNPO the definition of corpus which is the same definition as in the erst while Income Tax Act 961

Section 340-Deemed corpus donation-donation for repair of temple, gurudwara, church, mosque etc is deemed corpus donation provided conditions are fulfilled i.e. Separately identified, invested as per Section 350 which we will study, used for repair work for which received and not given a s donation to any person.

This section is meant for religious institutions receiving donations for repair work of religious institutions. Such donations will be deemed as corpus donation because repair woks are long terms and the section provides relief from applying 85% of receipts during the same year which is a challenge for religious institutions. The case to point to is Ram Janam Bhumi temple which receives huge donations which cannot be applied to the exten t of 85% in the same year.

Our Part 4 in the series on coming Monday will continue with our discussion on sub part 3 of Chapter VII-B which will cover two aspects i.e. Application of Income and Accumulation of Income if not applied to the extent of 85% of income under

Please post your queries on Forum regarding the provisions and the series. Have a nice weekend.

CS Sharad Bhargava

Sharad · May 18, 2026, 5:08am

Part 4 of Part 15

Welcome to Part 4 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will understand the remaining part of sub part 2 of Chapter XVIII-B of Income Tax Act 2025. Remember the title of this Chapter is “Special Provisions for Registered NPOs” and the title of the sub part is "Income of Registered Non-Profit Organisations (RNPO)'.

In Part 3, we had seen all provisions relating to Regular income, Taxable Regular income, Tax on income, Specified income, income not to be part of regular income, corpus donation and deemed corpus donation. It is essential that you understand the meaning of each of these nomenclature defining income of RNPO.

Let us move our attention to Application of income, Deemed Application of income and Accumulation of Income of RNPO as per sub part 3 o Chapter XVII-B

Section 341-Application of income-

1. The following sums will be allowed as application of income of the tax year to RNPO:

(a) sums applied for charitable or religious purpose in India (i) amount paid in tax year for charitable/religious purpose provided section 36(4-7)-cash payment>10k to a person in a day where exception can be made and 35(b)(i)-TDS not deducted under Chapter XIX-B will apply .

The sections 36(4-7) correspond to Section 40A(3) and Section 35(b)(i) corresponds to Section 40A(i)(a) of erstwhile Income Tax Act 19 61

(b) 85% as donation to another registered NPO

2. Application where corpus applied after 1.4.2021 when deposited back in Section 350 modes but within 5 years from applica tion

3. Application from loans and borrowings made after 1.4.2021 when repaid but within 5 years from applic ation

4. Following sums will not be allowed as Application

  (i) Depreciation if original cost of asset  claimed

 (ii) Set off of excess application for previo us years

(iii) Sum paid as corpus donation to ano th er RNPO

5. Application from corpus, loans and borrowings, accumulated income, deemed accumulated income, specified income for 85% application for the concerne d Tax Year

6. Deemed application-regular income applied is less than 85%, the shortfall maybe treated as deemed application where income is not received or for any other reason. Applied in succeeding year of receipt after exercising option. Option for deemed application filed before due date of filing of ITR under Section 263(1). Deemed application shall be considered as ap plication

7. Entire income from capital gains will be deemed as application if net consideration is for acquiring new capital asset or pro rata if entire net consideration not utilized for acquiring c ap ital asset

Section 342: Accumulated income-(i) accumulate/set apart for maximum 5 years (excluding period for a court order/injunction) stating purpose by furnishing statement on or before due date for furnishing income tax return-Section 263(1). The conditions for accumulated income a re as below

(i) Amount paid out of accumulated income to another RNPO is not application of accumulated income

(ii) Accumulated income is to be invested as per modes specified in 350

(iii) Repurposing of accumulated income which is in conformity of its objects with prior AO approval permitted

(iv) If RNPO dissolved, AO allow application of income to any other RNPO for the year in which it is dissolved based on application by RNPO

Section 343-Deemed accumulated income-Regular income less application and accumulated income upto 15% of regular income is deemed accumulated income to be interested in modes as per Section 350. Please note deemed accumulated income is different from accumulated income

Deemed accumulated income is nothing but the 15% set apart allowed from income of the tax year but a nomenclature has been provided to it now.

So, we have seen Application of income, Deemed application of income, Accumulated Income and Deemed accumulated income which are the nomenclature to describe situations of application of income by an RNPO.

We will do sub part 3 of Chapter XVIIB tomorrow. Happy learning.

CS Sharad Bhargava

Sharad · May 19, 2026, 4:28am

Part 5 of 15

Welcome to Part 5 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will understand sub part 3 of Chapter XVII-B i.e. “Special Provisions for Registered NPOs” of Income Tax Act 2025 and the title of the sub part is “Commercial activities by RNPO”.

Section 344-Business undertaking held as property-AO to allow income from such property claimed in books as charitable as part of Chapter 17-B

Section 345-Restriction on commercial activity by RNPO-No RNPO other than for advancement of objects of GPU undertake commercial activity unless

  (i) Such commercial activity is incidental to attainment of objectives

 (ii) Separate books of account maintained for such activity

Section 346-Restriciton on commercial activity by RNPO for advancement of object of GPU-No commercial activity unless

  (i) Such commercial activity is  for advancement of GPU object

 (ii) Commercial receipts not >20% of total receipts of tax year

(iii) Separate books of account maintained for such activity

‘Commercial activity’ has been defined in Section 355(e) to mean any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity;

You may note that this definition is the same proviso to Section 2(15) of ITA 1961 which defines charitable object.

Key takeaways:
Commercial activity by an RNPO other than for object of General Public Utility (GPU) is completely prohibited. This must be clearly understood otherwise there is huge risk of cancellation of exemption certificate. However, commercial activity which is incidental to achievement of objectives of RNPO (limb 1-6 of Section 2(23) is permitted but the onus to prove incidentality is on the RNPO. The Act does not define ‘incidental’.

An RNPO whose object is GPU can do commercial activity for advancement of GPU which will be more closely examined by the Department.

We will do sub part 4 of Chapter XVII-B of Income Tax Act 2025 tomorrow.

Please raise your queries on this education initiative on Forum.

CS Sharad Bhargava

Sharad · May 20, 2026, 3:54am

Part 6 of 15

Welcome to Part 6 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will understand sub part 4 of Chapter XVII-B i.e. “Special Provisions for Registered NPOs” of Income Tax Act 2025 and the title of the sub part is “Compliances” by RNPO.

There are 4 sections pertaining to Compliances by RNPO which have been brought together in one sub part of Chapter 17-B

Section 347-Books of Account-when income of an RNPO exceeds max not chargeable to tax, maintain prescribed books of accounts and other documents in the form, manner and place as prescribed.

You may remember that NPO needs to maintain books of accounts and other records as prescribed by Income Tax Rules from FY 2022-23. The Rule under Income Tax Rules 1962 was 17AA and is now Rule 46 under Income Tax Rules 2026. Please ensure that the books, other records, place, period and form etc are being complied with by you otherwise it is a violation.

• 348-Audit-when income of an RNPO exceeds max not chargeable to tax, get the accounts audited by statutory auditor and file audit report duly certified by statutory auditor as prescribed.

• 349-Return of income-when income of RNPO exceeds max not chargeable to tax, file ITR shall be filed under section 263((1) and (2) within time period allowed under 263(1)(c) of ITA 2025. Please note that exemption benefit be allowed for RNPO for filing belated return i.e. upto 31^st Dec and revised return upto 31^st March of the following year or before completion of assessment whichever is earlier with fees (1k for income upto Rs.5 lakhs and 5k for others)- Finance Act 2026 has enabled exemption benefit for belated and revised return by RNPO through inclusion of Section 263(4 )

• 350-Permitted modes of investment-as specified in Schedule XVI and further addition as maybe decided by Central Govt

Please note that all kind of incomes must be kept in prescribed modes including the 15% deemed accumulated income and deemed applicaiton. This was not a condition in Income Tax Act 1961.

Schedule XVI to ITA 2025-specifies permitted Forms or Modes of investment or Deposits by charitable/religious institution.

The Schedule lists 32 modes, a few examples are being shared for reference

deposit in any account with the Post Office Savings Bank
deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking
investment in immovable property;
investment in the units issued under any scheme of the mutual fund approved by SEBI
investment in Stock Certificate of the Sovereign Gold Bonds Scheme, 2015
shares in a public sector company
voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification specify

You may note that compliance with Section 350-Modes of investment is easy and simple but we have to be aware and disciplined.

We will do sub part 5 of Chapter XVII-B of Income Tax Act 2025 tomorrow.

Please raise your queries on this education initiative on Forum.

CS Sharad Bhargava

Sharad · May 21, 2026, 4:45am

Part 7 of 15

Welcome to Part 7 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will understand sub part 5 of Chapter XVII-B i.e. “Special Provisions for Registered NPOs” of Income Tax Act 2025 and the title of the sub part is “Violations” by RNPO.

There are 3 sections of ITA 2025 in which all violations by RNPO have been captured. Let us see these one by one.

Section 351-Specified Violations-by a RNPO

(i) Income applied for other than its objects

(ii) Commercial activity contravening Section 345-deleted for 346 (GPU) in Finance Act 202 6

(iii) Applied income for Private religious purpose

(iv) RNPO with charitable object applied income for Benefit of particular religious community/caste **other than SC/ST/backward class/women and children (this is a new addition and exception explicitly spelt out in the Act))**

(v) Activity not genuine/not as per conditions of registration certificate

(vi) Not complied with requirements of any other law-Section 3 32(7)

(vii) Application for registration under 332(1) contains false information

Where CIT on its own noticed specified violation or reference by AO or selected as per risk management strategy, he will call for information/inquiry and cancel or otherwise within 6 months of the quarter in which notice issued.

Please note that RNPO needs to be careful not to attract any of the trigger from (i) to (vii) mentioned above because these triggers result in cancellation of registration for exemption of RNPO which cannot be allowed under any circumstances.

Section 352-Tax on Accreted income-in addition to income tax chargeable to total income will also be liable for tax on accreted income at Maximum Marginal Rate (MMR) in following cases which will be calculated as

A=B-C where A is accreted income, B is Fair market value of total assets and C is Tota l liability

Tax on accreted income must be paid within 14 days of due date specified in Table otherwise simple interest in addition as per below

I = 1% of (T*P) where T is accreted tax and P is period of delay in month from due date

Table in Section provides cases triggering tax on accreted income

a. Registration cancelled/withdrawn

b. Modified object not conforming to registration conditions and not applied for fresh registration

c. Not applied on switching of regime as per Section 332 and 333 (inoperative clause)

d. Converts into form not eligible for gran t of registration

e. Merges with an entity which is not RNPO with same/similar objects

f. On dissolution, surplus assets not transferred to another RNPO within 12 months.

Who will be assesse in default-principal officer or trustee and organization into which assets have been transferred upon dissolution upto value of assets only

The above is a very draconian section where tax is levied on value of assets. RNPO should not allow this Section to get attracted in any circumstances.

Section 353-Other violations -where RNPO fails to

(i) Maintain books of account 

(ii) Fails to get books of account audited 

(iii) Fails to file return of income (including belated) 

(iv) Is for advancement of object of GPU has commercial receipts in contravention of Section 346

Regular income reduced by expenditure subject to following conditions will be taxable regular income and attract tax:

 (i) Capital expenditure not allowed 

 (ii) Exp must be incurred in India 

 (iii) Applied for objects 

 (iv) Not made from corpus 

 (v) No t made from loans and borrowings 

 (vi) No depreciation allowed if acquisition cost already claimed 

 (vii) No sub grant permitted 

 (viii) Payment made in contravention of Section  36(4- 7) and Section 35(b)(i) not allowed

No set off or deduction or allowance of any application or expenditure other than those referred to above shall be allowed.

The above is a facilitating section which allows for application on objects with restrictions to be considered for calculating taxable regular income when four of the violations in Section 353 are committed.

We will do sub part 6 of Chapter XVII-B of Income Tax Act 2025 tomorrow.
Please raise your queries on this education initiative on Forum.

CS Sharad Bhargava
21.5.2026

Sharad · May 22, 2026, 5:37am

Part 8 of 15

Welcome to Part 8 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will understand sub part 6 of Chapter XVII-B i.e. “Special Provisions for Registered NPOs” of Income Tax Act 2025 and the title of the sub part is **“Approval for purpose of deduction under section 133(1)(b)(ii)” of an RNPO. This sub part has only one section i.e. Section 354 of ITA 2025

Let us first understand Section 133(1)(b)(ii) of Income Tax Act. This section corresponds to Section 80G of Income Tax Act 1961 but let us now unlearn 80G and learn Section 133 instead. So, what is section 133(1)(b)(ii) say. This Section is not part of Chapter XVII-B.

133(1)(b)(ii)-Deduction in respect of donations to certain funds, charitable institutions, etc.

133 (1) -In computing total income of an assesse, there shall be deducted:

(b) 50% of sums paid as donation during the tax year to––

(ii) any fund or any institution to which this section applies, if:—

(A) it is established in India for a charitable purpose; and

(B) it is a registered non-profit organisation and approved under section 354;

The Section says that a donor as assesse will get 50% tax shield if the donation is to an RNPO for charitable purpose. So, your organisation should be a registered NPO under Section 332 of ITA 2025 or provisions of ITA 1961 and must also be approved under Section 354 of ITA 2025.

Also, all provisions of Section 80G are contained in Section 133-i.e. in money, cash not>2k, statement of donation verified as per risk management strategy

After understanding Section 133(1)(b)(ii), let us come to Section 354 of our Chapter XVII-B , the Chapter which is Gita or Bible for RNPO.

Section 354- Application for approval for purpose of Section 133(1)(b)(ii)- An RNPO may make application for approval under 133(1)(b)(ii) subject to

Not for benefit of particular religious caste/community
for charitable purpose and incur less than 5% of income for religious purpose
Constitution instrument does not permit transfer of assets other than for charitable porpoise
Maintains accounts for receipt and expenditure
Prepares donation including correction statement and furnishes to Dept
Furnishes donation certificate to donor

Table explaining cases, timeline for application by assesse and approval by Dept and period of validity of approval

Sl. No.	Case	Time limit for furnishing application	Time limit for passing order	Validity of registration
1	Where the activities of the applicant have not commenced	At any time during the tax year from which approval is sought.	One months from the end of the month in which application is made.	Three tax years commencing from the tax year in which such application is made..
2	Where the activities of the applicant have commenced.	At any time during the tax year from which approval is sought.	Six months from the end of the quarter in which application is made	Five tax years commencing from the tax year in which such application is made.
3	Where the applicant has provisional approval and activities have commenced	Within six months of the commencement of activities.	Six months from the end of the quarter in which application is made.	Five tax years commencing from the tax year in which such application is made.
4	Where the provisional approval of the applicant is due to expire and activities have not commenced.	At least six months prior to the expiry of the provisional approval.	Six months from the end of the quarter in which application is made.	Five tax years following the tax year in which such application is made.
5	Where the period for approval of a registered organisation is due to expire.	At least six months prior to the expiry of the said approval.	Six months from the end of the quarter in which application is made.	Five tax years following the tax year in which such application is made.

Application made to P/CIT for approval as per procedure continued in above Table
For sl 2-5 in Table P/CIT call for information and pass order

for approval if activities are genuine and it abides with any other laws
Reject and communicate

P/CIT only can pass order for provisional approval

Section 354A -merger of two RNPOs with same/similar objects fulfilling conditions (12AC of ITA 1961) to be tax neutral-introduced by Finance Act 2026. Accreted tax will apply if merged with

(a) an entity other than a registered NPO; or
(b) a registered NPO having similar objects but the merger does not fulfil the prescribed conditions; or
(c) a registered NPO not having the same or similar objects.

We will do sub part 7 which is the final sub part of Chapter XVII-B of Income Tax Act 2025 tomorrow.

Please raise your queries on this education initiative on Forum.

CS Sharad Bhargava
22.5.2026

Sharad · May 25, 2026, 4:21am

Part 9 of 15

Good morning and Welcome to Part 9 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will understand sub part 7 which is the final sub part of Chapter XVII-B i.e. “Special Provisions for Registered NPOs” of Income Tax Act 2025 and the title of the sub part is “Interpretation”.

This sub part has only one section i.e. Section 355 of ITA 2025 and provides definition for various words used in Chapter XVII-B.

Let us understand the definition of the more important words used in Chapter XVIIB.

(a) “Anonymous donation"-voluntary contribution where recipient does not maintain details of identify i.e. name and address of donor

(b) “Approval”-approval under 80G of IT Act 1961 or section 354 of ITA 2025

(c) “Donation”-any voluntary contribution received by RNPO

Donation and VC are used interchangeably in ITA 2025

(d) “Commercialactivity” means any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity

(e) “Registration” includes provisional registration, provisional approval or approval referred to in sections 10(23C) or 12AB(1) of the Income-tax Act, 1961 and under section 332, but shall not include approval under section 80G(5) of the said Act or section 354 ;

(f) “Registered non-profit organisation” means any person having a valid registration under any specified provision and such registration has not been cancell ed

g) “Related person” means any of the following persons:

(i) the author or the founder of the registered non-profit organisat ion;

(ii) any person whose total contribution to such registered non-profit organisation, during the relevant tax year exceeds one lakh rupees, or, in aggregate up to the end of the relevant tax year exceeds ten lakh rupees, as the case ma y be;

(iii) where such author, founder or person is a Hindu undivided family, a member of the f amily;

(iv) any trustee or manager (by whatever name called) of the registered non-profit organi sation;

(v) any relative of any persons referred to in sub-clause (i), (iii) or (iv);

(vi) any concern in which any of the persons referred to in sub-clauses (i), (iii) (iv) or (v) has a substantial interest (defined as 20%> voting right /profits)

Please note that Specified Person under Section 13 of Income Tax Act 1961 has been replaced with Related Person in ITA 2025.

(h) “Value” means the value of any benefit or facility granted or provided free of cost or at concessional rate to any rel ated person

(i) “Specified person” means any person which is registered under any specified provision at any time since its incorporation or creation;

(j) “Specified provision” means section 12A, 12AA or 12AB or section 10(23C) of the Income-tax Act, 1961 or section 332;

This means Sections 12A, 12AB, 10(23C) and 332 are all valid in the conte xt of an RNPO.

(k) “Wholly for charitable or religious purposes” shall mean wholly for charitable purposes or wholly for religious purposes or wholly for charitable and rel igious purposes

We have captured the more important words used in the Chapter for your understanding. It is very important that the meaning of each word is clearly known so that action and compliance is clearly ensured.

With this Part 9, we have completed coverage of all sub parts 1 to 7 of Chapter XVII- B meant for RNPO.

We will learn other provisions of the Income Tax Act 2025 applicable to NGOs tomorrow.

Please raise your queries on this education initiative on Forum.

CS Sharad Bhargava
25.5.2026

Sharad · May 26, 2026, 4:29am

Part 10 of 15

Good morning and Welcome to Part 10 of our orientation series on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will summarise all sub parts of Chapter XVII-B i.e. “Special Provisions for Registered NPOs” of Income Tax Act 2025 that we have covered in Part 1-9 of our series.

So, we are now called Registered Non Profit Organisation (RNPO) in Income Tax as a uniform description is crystal clear. We understood that all provisions relating to RNPO are brought into one chapter i.e. Chapter XVII-B of Income Tax Act. Which Person can be an RNPO is also clearly spelt out in law which was not explicit in ITA 1961. We noted the concept of Tax Year effective 1^st April 2026 which means the same thing as the financial year, there is no other description now. We saw that the definition of Charitable Purpose remains unchanged except that the proviso has been dropped and taken to the chapter on Commercial activities.

We have seen that there are 7 seven neat sub parts of Chapter XVII. Let us revise them:

Registration-Sections 332-333
Income of registered NPO-Sections 334-343
Commercial Activities by RNPO–sections 344-346
Compliances-sections 347-350
Violations-sections 351-353
Approval for purpose of deduction under section 133(1)(b)(ii)
Interpretation–Section 355

In short, these sub parts govern registration as a tax exempt entity, income of an RNPO which includes application, deemed application, accumulation and deemed accumulated income, commercial activities and conditions for undertaking such activities under the first limbs and under GPU, compliances on books of accounts, audit, filing ITR and modes of investment, Violations leading to cancellation of registration, MMR tax on accreted income and computation of income for other violations, approval process for enabling the RNPO to provide Section 133 (erstwhile 80G) benefit to the donor and finally definition of various words used in the chapter.

We are appending a document to help you with navigation of various sections used in Income Tax Act 1961 to the Income Tax Act 2025. This will help you map and understand the sections and provisions in both laws for easy navigation specially the sections relevant for NPOs.

We will do TDS related sections and provisions in ITA 2025 tomorrow.

Please post your queries on Forum.

CS Sharad Bhargava
26.5.2026

ITA 1961 to 2025- section navigator.pdf (916.8 KB)

Sharad · May 27, 2026, 5:32am

Part 11 of 15

Good morning and Welcome to Part 11 of our orientation on Income Tax Act 2025 for Registered Non-Profit Organisations (RNPO).

Today, we will learn about changes in TDS provisions relating to NGOs

Please note that the TDS chapter in Income Tax Act 20255 is Chapter XIX-
Tax deducted at source(TDS) and Tax Collected at source (TCS).

For non-profits, the following TDS sections in ITA 1961 and ITA 2025 which are more relevant are as follows

Nature of Payment	Section # in ITA 1961	Section # in ITA 2025
Salary	192	392
Payment to Contractor	194C	393(1) Table sl. No 6(i)
Fees for Professional & Technical Services	194J	393(1) Table sl. No 6(iii)
Rent payment	194I	393(1) Table sl. No 2(ii)
Other transactions
Payment for Purchase of Goods	194Q	393(1) Table sl. No 8(ii)
Payment of benefits to service provider	194R	393(1) Table sl. No 8(iv)

Section 393(2)- TDS for payment to non-resident/foreigner

Payment made to non resident/foreigner like fee for technical services, royalty, dividend etc attracts TDS subject to checking Double Taxation Avoidance Agreement (DTAA) with that country
No threshold, basis rates in force
Declaration regarding foreign payments and TDS-Form 15CA (remittance less than Rs. 5 lakhs) and/or 15CB (Certificate by CA for more than Rs. 5 lakhs and check DTAA) with Department and provided to bank for remittance

Certificate for deduction (TDS) at lower rate (LTDC)-Section 395

Where income-tax is required to be deducted at time of credit or payment under the provisions of sections 392 and 393, if Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, the Assessing Officer shall, on an application made by the assessee in Form 128 (Form 13 earlier), give such certificate
Where any such certificate is given, the person responsible for paying the income shall deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be for the period of validity of certificate.

Other TDS provisions-Chapter XIX-Collection & Recovery of Tax

Section 398-Failure to deduct and pay/collect TDS/TCS
Interest for Late Deduction of TDS is 1% every month or part of a month till the date of deduction
Interest for Late Deposit of TDS is 1.5% every month or part of a month till the date of deposit.

Section 427-Fee for late filing of TDS return (234E)
Rs. 200 Per day till the time failure continues or total amount of TDS deducted during the quarter (Whichever is less)

Section 461-Penalty for failure to furnish TDS returns or submitting incorrect information (271H)
Minimum Rs. 10,000/- and can extend up to Rs.1,00,000/-

Section 397(2)-Obligation to provide PAN (206AA)
Obligation of Deductee to furnish PAN number to the deductor and mention in correspondence, bills, vouchers, and other documents. TDS deducted at 20% if PAN is not provided by deductee

Section 135-Application for allotment of TAN (49B)
within one month from the end of the month in which tax is deducted for the first time.

Section 397(3)(f)-limitation of 2 years from end of Tax Year only for correction of TDS statements

TDS related Forms-ITA 2025 and ITA 1961

Form No. 168-Form 26AS and AIS (single form now)
Form No. 138-Form 24Q
Form No. 140-Form 26Q
Form No. 144-Form 27Q
Form No. 136-Form 16
Form No. 131-Form 16A
Form No 141-Form 27QB, 27QC
Form No. 143-Form 27EQ

New Payment Codes for TDS deposit wef 1.4.2026

When paying TDS for April 2026, select Income Tax Act 2025 and use the following 4-digit numeric code on TDS Challan and TDS return

1002-TDS on Salary (392)
1023, 1024-TDS on contractor payment-1% and 2% respectively (section 393)
1026-Fee for Technical Services-2% (section 393)
1027-Fee for Professional Services-10% (Section 393)
1009-Rent other than plant and machinery-10% (Section 393)
1008-Rent on plant and machinery-2% (Section 393)

Please post your queries on Forum.

CS Sharad Bhargava
27.5.2026