Orientation on New Income Tax Act 2025 and Income Tax Rules 2026 for nonprofits for understanding and orientation of the new tax law | Part 1 of a 15 Part daily series on PATTIC Forum

Training
1

We present to you the New Income Tax Act 2025 and Income Tax Rules 2026 for nonprofits/charitable institutions in easy-to-understand manner since the Act and Rules have become effective from 1.4.2026.

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Readers may note familiarity with the following chapters and sections of the Income Tax Act 1961 which has been repealed from 1.4.2026 and replaced with Income Tax Act 2026.

  1. Chapter I-Section 2(15) Definition of charitable purpose

  2. 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

  1. Chapter VI-A-80G-Deduction in respect of donations to certain funds, charitable instit utions etc

  2. Chapter XII-Section 115BBC Taxation of Anonymous donations 115BBI Specified income of certain i nstitutions

  3. Chapter XIIB-Section 115TD-115TF Exit tax on accreted income of charitable institutions

  4. 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)

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

We will take up each of the seven subparts daily. Sub part 1 will be covered on 14th May and so on in this 15 Part series.

See you tomorrow. Please raise questions on Forum.

CS Sharad Bhargava