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(Sections 354 and 354A, Income Tax Act, 2025 – Part B of Chapter XVII: Special Provisions for Registered Non-Profit Organisations) Note: As part of the transition to the Income Tax Act, 2025, the concepts of "previous year" and "assessment year" have been replaced with a single concept of a "tax year". Throughout the series, "tax year" refers to the financial year beginning on 1 April and ending on 31 March. Introduction This is the seventh and concluding issue in a series explaining how the Income Tax Act, 2025 ("the Act") taxes Registered Non-Profit Organisations ("RNPOs"). The earlier issues dealt with registration, the classification of income, application of income, commercial activities, compliance requirements, and the consequences of violations. This issue covers two remaining provisions: Approval to receive tax-deductible donations (Section 354): Registration as an RNPO makes the organisation's own income eligible for exemption. To provide tax deduction relief to donors against their donations, a separate approval is required. Section 354 sets out who may apply, the conditions to be met, and the time limits and validity of the approval. Mergers between RNPOs (Section 354A): This provision explains when a merger does not trigger the tax on accreted income discussed in Issue 6: Violations, Registration Cancellation, and Tax Consequences for RNPOs. The two provisions are connected by a common theme: both depend on the RNPO keeping its approvals current and its structure consistent with its charitable purpose. Tax Deduction for Donors: Approval under Section 354 In Issue 1: Registration of Non-Profit Organisations under the Income Tax Act, 2025, we discussed how an organisation registers as an RNPO in order to claim exemption on its own income. Registration under Section 332 is what brings the organisation within the RNPO framework and determines how its income is taxed. Section 354 deals with a separate approval that determines whether a donor can claim a deduction for a donation made to the organisation. For RNPOs that raise funds from taxpayers, and corporations, maintaining a valid approval is essential. A loss of the approval obtained under Section 354 can affect donors' ability to claim a deduction and, in turn, the organisation's fundraising. Section 354 sets out the conditions an RNPO must meet , to allow its donors to claim a deduction, when and how it should apply for this approval, how long the approval lasts, and how the tax authority decides the application. The application is made to the Principal Commissioner or Commissioner ("PCIT/CIT") in the prescribed form and manner. Conditions to be Satisfied to Receive Approval under Section 354 To be eligible for approval, an RNPO must meet the following conditions: No community or caste preference: It must not be set up for the benefit of any particular religious community or caste. Charitable purpose: It must be established in India for a charitable purpose. Limit on religious spending: Its religious expenditure in a tax year must not exceed 5% of its total income. Charitable use of assets: Its constitution or governing rules must not allow any of its assets to be transferred, at any time, for a purpose other than a charitable purpose. Regular accounts: It must maintain regular accounts of its receipts and expenditure (as discussed in Issue 4: Compliance Requirements Applicable to an RNPO) Statement of donations: It must file the statement of donations in Form 113 with the income-tax authority, by 31st May immediately following the end of the relevant tax year. The organisation shall issue each donor a certificate in Form 114, specifying the amount donated. The certificate shall be generated and issued only after the RNPO has duly filed Form 113, enabling donors to claim the applicable tax deduction. When and How to Apply: the Five Cases The time limit for applying, the time within which the PCIT/CIT must pass an order, and the period for which the approval remains valid all depend on the RNPO's stage. The Act groups these into five cases. Case Situation When to apply Order to be passed within Validity of approval 1 Activities have not commenced At any time during the tax year from which approval is sought One month from the end of the month in which the application is made Three tax years, commencing from the tax year of application (provisional approval) 2 Activities have commenced At any time during the tax year from which approval is sought Six months from the end of the quarter in which the application is made Five tax years, commencing from the tax year of application 3 Provisional approval held and activities have commenced Within six months of commencement of activities Six months from the end of the quarter of application Five tax years, commencing from the tax year of application 4 Provisional approval is about to expire and activities have not commenced At least six months before the provisional approval expires Six months from the end of the quarter of application Five tax years, following the tax year of application 5 Existing approval is about to expire (renewal) At least six months before the approval expires Six months from the end of the quarter of application Five tax years, following the tax year of application How the PCIT/CIT Decides to Grant Approval under Section 354 The procedure depends on the case. Case 1 (activities not commenced). The PCIT/CIT must pass an order granting provisional approval. No inquiry into genuineness is required at this stage, since there are no activities yet to examine. Cases 2 to 5. The PCIT/CIT may call for documents or information, or make inquiries, to satisfy himself about: the genuineness of the activities; and compliance with those requirements of any other law in force that are material to achieving the RNPO's objectives. The outcome is one of the following: Satisfied: a written order approving the application. Not satisfied: after giving the RNPO a reasonable opportunity of being heard, a written order rejecting the application. Mergers between RNPOs (Section 354A) The General Position As explained in “Issue 6 -Violations, Registration Cancellation, and Tax Consequences for RNPOs”, certain events trigger tax on accreted income, which is a one-time exit tax on the RNPO's accumulated net assets at the maximum marginal rate. One such event is a merger with an entity that is not an RNPO, or with an RNPO that does not have the same or similar objects. In that case, the date of the merger is the date for calculating the tax. Section 354A provides relief for mergers between two RNPOs. When the Exit Tax does not Apply The provisions on tax on accreted income (Section 352) do not apply to the merger of one RNPO into another RNPO if both of the following are met: Same or similar objects. The RNPO into which the merger takes place has the same or similar objects as the RNPO that is merging. Prescribed conditions. The merger fulfills the conditions prescribed under the Rules. Note: Section 354A requires the merger to fulfil "such conditions as may be prescribed". As on the date of this primer, these conditions have not yet been specified in the Income Tax Rules, 2026. Until they are notified, an RNPO cannot be certain that a merger will qualify for relief. RNPOs planning a merger should monitor the notification of these conditions and take professional advice before proceeding. Key Takeaways Registration as an RNPO and approval for donor deduction are separate. An RNPO needs both if it wants its donors to be able to claim a deduction. To qualify for approval, religious expenditure must stay within 5% of total income in every tax year, and the constitution must not allow any assets to go to a non-charitable purpose. Donation statements (Form 113), correction statements and donor certificates (Form 114) are continuing obligations, to be met every year the approval is held. A new organisation begins with a three-year provisional approval and must apply for regular approval within six months of starting activities. Renewal applications must be filed at least six months before the approval expires. The expiry date should be diarised as soon as the approval is granted. A merger between two RNPOs with the same or similar objects, where the prescribed conditions are met, does not attract tax on accreted income. A merger with an entity that is not an RNPO, with an RNPO of different objects, or with an RNPO of similar objects where the prescribed conditions are not met, does attract the tax (Refer Issue 6: Violations, Registration Cancellation, and Tax Consequences for RNPOs) Conclusion of the Series This series was written to help RNPOs understand what the Income Tax Act, 2025 requires of them, and when. The table below mentioned what each of the issue covered: Issue Theme Question it answers 1 Registration of Non-Profit Organisations under the Income Tax Act, 2025 How does an organisation become an RNPO? 2 Classification of Income of RNPOs Which income is regular, specified or residual, and how is each taxed? 3 Application of Income of an RNPO What spending counts towards the 85% requirement? 4 Permitted Commercial Activities for an RNPO What Commercial Activities Are Permitted for an RNPO under the Income Tax Act, 2025 5 Compliance Requirements Applicable to an RNPO What books, audit, returns and investment rules must it follow? 6 Violations, Registartions, Cancellations and Tax Consequences for an RNPO What happens if it fails to comply, or if it ceases to be an RNPO? 7 Donor approval and mergers How can it keep donors eligible for deduction, and how can it merge without an exit tax? The common message of the series is that exemption is conditional. Registration, application of income, record-keeping, donor-deduction approval and structural changes each carry their own requirements and timelines. RNPOs are best served by building these into a single annual compliance calendar and by reviewing their status before, not after, any significant change in activities, funding or structure. This issue is the seventh (final) part in a seven-part series on the Income Tax Act, 2025, effective 1 April, 2026. Read the Previous Issues in This Series: Part 1: Registration of Non-Profit Organisations under the Income Tax Act, 2025 Part 2: Classification of Income of Registered Non-profit Organisations (RNPOs) under the Income Tax Act, 2025 Part 3: Application of Income of RNPO: What Expenditure Qualifies as Application of Income Towards RNPO’s Charitable/Religious Purposes Part 4: What Commercial Activities Are Permitted for a Registered Non-profit Organisation (RNPO) under the Income Tax Act, 2025 Part 5: Compliance Requirements Applicable to an RNPO Part 6: Violations, Registration Cancellation, and Tax Consequences for RNPOs

(Sections 347–350, Income Tax Act, 2025 — Part B of Chapter XVII: Special Provisions for Registered Non-Profit Organisations) Note: As part of the transition to the Income Tax Act, 2025, the concepts of "previous year" and "assessment year" have been replaced with a single concept of a "tax year". Throughout the series, "tax year" refers to the financial year beginning on 1 April and ending on 31 March. Introduction This is the fifth issue in a seven-part series explaining how the Income Tax Act, 2025 ("the Act") taxes Registered Non-Profit Organisations ("RNPOs"). In the previous issue, Commercial Activities Undertaken by an RNPO, we discussed how commercial activities undertaken by an RNPO are treated under the Act, and the conditions that must be satisfied for income arising from such activities to continue to qualify for exemption. This issue looks at the compliance requirements for RNPOs under the Income Tax Act, 2025. An RNPO's tax exemption is conditional upon certain compliance requirements: Certain RNPOs (whose income crosses a particular threshold) must maintain proper books and records, have their accounts audited, and file a return of income. RNPOs may invest or deposit their funds only in permitted modes. This requirement is independent of the RNPO's income crossing the prescribed threshold. When Do Compliance Requirements for RNPOs Apply? The Act uses a common income threshold to determine when the requirements relating to books of account, audit of accounts, and filing of return of income apply to an RNPO. The principle: If an RNPO's total income (computed without giving effect to its exemptions) exceeds the maximum amount not chargeable to tax in a tax year, it must comply with the requirements under maintaining books of account (Section 347), Audit of Accounts (Section 348), and filing return of income (Section 349). Illustration ABC Foundation, an RNPO, has a receipt of ₹ 85 lakh in a tax year, with the following breakup: Program fees - ₹ 20 lakh Interest on savings - ₹ 4 lakh Rent Income - ₹ 5 lakh General Voluntary contribution - ₹ 15 lakh Grant - Rs 10 lakh Incidental business income - ₹ 6 lakh Corpus donation (with specific written direction) - ₹ 25 lakh First step: Compute the total income of RNPO without giving effect to any exemption. For this. We need to classify each receipt under the Act's ordinary provisions first, asking: if the RNPO framework didn't exist, would this receipt be income under the general provisions of the Act? Receipt Income Under Ordinary Principles? Reason for Classification Programme fees Yes Revenue receipt for services rendered Interest income Yes Revenue receipt Rent income Yes Revenue receipt General voluntary contributions Yes Revenue receipt (no capital character) Grant received Yes Revenue receipt Business income Yes Revenue receipt Corpus donation No A donation received with a specific direction that it forms part of corpus is capital in character. It doesn't become income merely because it was received by an RNPO [affirmed as per Shri Vasu Pujya Jain Derasar Pedhi vs. ITO [1991] 39 TTJ 337 (Jaipur Trib.) case law ] Second Step: Adding up only what qualifies as income under ordinary principles: ₹20 lakh + ₹4 lakh+ ₹5 lakh + ₹15 lakh + ₹10 lakh + ₹6 lakh = ₹60 lakh. The ₹25 lakh corpus donation is left out at this stage, not because it is "exempt," but because it is not an income. Third Step: Once income under ordinary principles is worked out ₹60 lakh in this example that figure is what gets tested against the threshold. For tax year 2026-27, the maximum amount not chargeable to income tax (the basic exemption slab, before any rebate) is ₹4 lakh. Since ABC Foundation's ₹60 lakh comfortably exceeds this, the compliance obligations of maintaining books of accounts, audit and filing returns of income) discussed below apply to it for tax year 2026-27. Note: The threshold is not fixed and may change from one tax year to another. RNPOs should therefore verify the threshold applicable for the relevant tax year. Maintaining Books of Account and Other Records The RNPO is required to maintain books of account and other documents as prescribed under Rule 187 of the Income Tax Rules, 2026 (see Box 1). The purpose of maintaining these records is not limited to recording income and expenditure. The records should provide a clear picture of the RNPO's activities, finances, application of income, assets and other transactions. Books, Records, and Supporting Documents to Be Maintained by an RNPO Books of account, including cash book; ledger; journal; copies of bills and receipts issued by the RNPO; original bills and receipts relating to payments made by the RNPO; and any other books necessary to give a true and fair view of the RNPO's affairs and explain its transactions. Supporting records such as details of its projects and institutions, including their name, address and objectives; income from charitable or religious activities, property or investments, voluntary contributions, permissible commercial activities and other sources; application of income, including amounts applied in India or outside India; amounts transferred or paid to other RNPOs; accumulated or set-aside income and the purpose for which it is accumulated; investments made by the RNPO; corpus donations, including donor details and the manner in which corpus funds are applied or invested; loans and borrowings, including lender details, repayment terms and application of borrowed funds; immovable and movable property; transactions with related persons; and any other document relevant to the RNPO's operations. Box 1: List of Records to be Maintained Under Rule 187 of the Income Tax Rules, 2026 Note: Rule 187 of the Income Tax Rules, 2026 should be referred to for the complete & detailed list of records and particulars required to be maintained. At What Place Should the Records be Kept? As a general rule, books of account and other documents should be maintained at the registered office of the RNPO. This is particularly relevant for RNPOs that operate through multiple project offices or use an external accountant to maintain their records. An RNPO may keep some or all of its records at another location in India if: The management passes a formal resolution approving the alternate location; The RNPO informs its jurisdictional AO in writing within seven days of passing the resolution; and The intimation provides the full address of the alternate location and is signed and verified by the person authorised to verify the RNPO's return of income. In What Form Can the Records be Maintained? Books of account and other required documents can be maintained in physical or electronic form. An RNPO may also use a combination of both. For example, an RNPO may maintain its accounting records electronically while keeping certain original bills, receipts or agreements in physical form. How Long Should the Records be Kept for? As a general rule, books of account and other required documents should be maintained for at least six years from the end of the relevant tax year. There is an exception where an assessment is reopened. In such a case, the books and documents relevant to that assessment must continue to be maintained until the reopened assessment is finally completed, even if this extends beyond the normal six-year period. Six years is the normal minimum period. If an assessment is reopened, the relevant records should not be destroyed until that matter is finally resolved. Audit of Accounts The audit provides an independent review of the accounts and results in an audit report. The detailed requirements relating to the audit and the audit report are prescribed under Rule 188 of the Income Tax Rules, 2026. For an RNPO: The audit must be conducted by a Chartered Accountant holding a valid Certificate of Practice; An audit report must be furnished for the relevant tax year in the prescribed form; The report must be signed and verified by the Chartered Accountant; and The report must contain the prescribed particulars. In simple terms: The RNPO maintains its books and records, and the statutory audit provides an independent check of those accounts. Return of Income Where the RNPO's income crosses the prescribed threshold, it is required to file a return of income for that tax year in the prescribed manner and within the prescribed time. An important point here is that the obligation to file a return is not dependent on whether the RNPO ultimately has any tax to pay. An RNPO may have no tax to pay because of its exemption. However, it may still have to file a return if its income crosses the prescribed threshold. The filing requirement is triggered by the level of income, not by the amount of tax ultimately payable. Investing or Depositing Funds in Permitted Modes The Act requires an RNPO to invest or deposit certain funds, (refer Box 2) only in specified modes (refer Box 3). An investment or deposit made in a mode that is not permitted may have tax consequences for the RNPO as discussed in Issue 3. RNPO Funds That Must Be Invested or Deposited in Permitted Modes Current tax year's regular income not applied: Up to 15% of the RNPO's regular income earned in the current tax year can be retained without applying it to its objects, and without any formal accumulation process. However this unapplied portion must still be invested or deposited only in Schedule XVI-permitted modes (see Issue 3). Income accumulated or set apart under Section 342(1): Amounts formally set aside for future application (see Issue 3), whether accumulated in the current year or carried forward from a preceding year and not yet applied. Corpus donations: Voluntary contributions received with a specific direction that they form part of the corpus, whether received during the current year or carried forward from an earlier year. Corpus donations for renovation/repair of religious places — donations received for renovation or repair of a temple, mosque, gurdwara, church, or other notified places, which are treated as corpus under Section 340. Not covered by this requirement: Profits from a business carried on by the RNPO, provided separate books of account are maintained for that business. Box 2: Funds of RNPO that must be invested or deposit as per Section 350 of the Income Tax Act, 2025 Permitted Modes of Investment or Deposit for RNPO Funds Government-backed instruments: Savings certificates, small savings schemes, Post Office Savings Bank accounts, government securities, and UTI units Bank and cooperative deposits Government-guaranteed and public sector instruments: Guaranteed debentures, public sector company investments, and bonds from specified financial institutions. Specified infrastructure and market-linked instruments: a narrowly defined set including Sovereign Gold Bonds, specified mutual fund units, infrastructure investment trust units, and shares of certain notified entities. Immovable property (excluding machinery or plant, unless installed as part of a building) Grandfathered legacy assets — certain older holdings (e.g., corpus assets held since 1 June 1973, or specified educational/medical institution assets held since 1 June 1998) remain valid even though they wouldn't qualify under the current list. Equity shares in incubatees permitted mode of investment where the RNPO is itself an incubator notified by the DST/Ministry of Science and Technology as a Technology Business Incubator (TBI) or Science and Technology Entrepreneurs Park (STEP). Box 3: Permitted Modes of Investment Note: The above mentioned modes are summarised for reading. Refer Schedule XVI, Income Tax Act 2025 for detailed reading of specified modes. How do these Requirements Fit Together? Once the income threshold is crossed, the compliance requirements can be viewed as a connected process: Income threshold crossed -> Books of account and supporting records maintained -> Accounts audited -> Audit report furnished -> Return of income filed Alongside this, throughout the year, RNPO funds may be invested or deposited only in permitted modes. This issue is the fifth part in a seven-part series on the Income Tax Act, 2025, effective 1 April, 2026. Read the Previous Issues in This Series: Part 1: Registration of Non-Profit Organisations under the Income Tax Act, 2025 Part 2: Classification of Income of Registered Non-profit Organisations (RNPOs) under the Income Tax Act, 2025 Part 3: Application of Income of RNPO: What Expenditure Qualifies as Application of Income Towards RNPO’s Charitable/Religious Purposes Part 4: What Commercial Activities Are Permitted for a Registered Non-profit Organisation (RNPO) under the Income Tax Act, 2025 Part 5: Compliance Requirements Applicable to an RNPO Part 6: Violations, Registration Cancellation, and Tax Consequences for RNPOs Part 7: Tax Deduction for Donors and Mergers of RNPOs under the Income Tax Act, 2025

(Sections 344-346, Income Tax Act, 2025 (Part B of Chapter XVII – Special Provisions for Registered Non-Profit Organisations) Note: As part of the transition to the Income Tax Act, 2025, the concepts of "previous year" and "assessment year" have been replaced with a single concept of a "tax year". Throughout the series, "tax year" refers to the financial year beginning on 1 April and ending on 31 March. Introduction This is the fourth issue in a seven-part series explaining how the Income Tax Act, 2025 (“the Act”) taxes Registered Non-Profit Organisations (RNPOs). In the previous issue, Application of Income of RNPO - What Expenditure Qualifies as Application of Income Towards RNPO's Charitable/Religious Purposes, we discussed the three routes by which an RNPO satisfies its 85% application requirement: direct application under Section 341, formal accumulation under Section 342, and the automatic 15% deemed accumulation under Section 343. This issue examines how the Income Tax Act, 2025 treats commercial activities undertaken by RNPOs. The Act first recognises that an RNPO may itself own a business undertaking as part of its property (Section 344). It then lays down the conditions under which income from such business activities can continue to qualify for exemption (Section 345). Finally, where the RNPO is established for the advancement of any other object of general public utility, the Act prescribes additional restrictions on commercial activities (Section 346). The three provisions should be read together. Section 344 explains what constitutes a business undertaking held by an RNPO and how its income is determined. Sections 345 and 346 then prescribe the conditions under which the income from such business activities continues to qualify for exemption. Business Undertaking Held as property (Section 344) Section 344 recognises that an RNPO may hold a business undertaking as part of its property and explains how its income is computed. Whether the income from that business undertaking ultimately qualifies for exemption depends on the conditions prescribed under Sections 345 and 346, discussed below. The term “property held by an RNPO” includes business undertakings and assets such as land, buildings, or investments. Where an RNPO claims that the income from a business undertaking qualifies for exemption, the Assessing Officer (AO) may independently determine the income of the undertaking. The computation must be made in accordance with the provisions of the Income Tax Act, 2025, in the same manner as for any other business entity. If the income determined by the AO is higher than the income reflected in the undertaking's books of account, the excess amount is deemed not to have been applied towards the RNPO's charitable or religious purposes. Consequently, this excess is treated as specified income under Section 337 of the Act and taxed at 30% (covered in the earlier issue). Note: The term "business undertaking" has not been defined in the Act per se. However, as per the rulings of the Supreme Court, its meaning has been built through a set of consistent tests carried forward from the corresponding provision of the Income Tax Act, 1961: ● Ownership, not mere involvement: For a business to qualify as a business undertaking held by an RNPO, it must be owned by the RNPO and form part of its property or assets. Mere participation in the management of a business or receipt of its profits is not sufficient. For example, an RNPO does not "hold" a business simply because it receives a share of its profits or assists in its management if the business itself is owned by another person. The requirement of Section 344 is satisfied only where the business undertaking itself forms part of the RNPO's property. ● Mere common ownership does not, by itself, trigger "held" status: Overlapping trustees, directors, or promoters between the RNPO and a separate business entity does not make that entity's business the RNPO's property. If a business is run through a separately incorporated entity with common promoters or directors, the relevant compliance question shifts, from whether it is "property held" under Section 344, to whether that entity is a "related person" under Section 355 (covered in the later issue), triggering the stricter related-person taxation rules under Section 337. ● How the business came to be held: The crucial question is whether the business undertaking itself has become the property of the RNPO. This may happen where the business is settled upon the RNPO or is subsequently acquired and vested in the RNPO. However, if the trustees merely carry on a business on behalf of the RNPO without the business undertaking itself becoming trust property, the business is not automatically regarded as one held by the RNPO. Illustration 1: Context: An RNPO operating an educational institution also owns and runs a printing press as part of its property, treating it as a business undertaking held under the RNPO. For Tax Year 2027, the RNPO's own accounts show income of ₹12 lakh from the printing press, which it includes as regular income and claims is eligible for the benefits available under this Part. Step 1: On assessment, the AO examines the printing press's accounts and, applying the Act's normal assessment provisions, determines the undertaking's actual income for the year to be ₹18 lakh, higher than the ₹12 lakh shown in the RNPO's own books. Step 2: The excess determined by the AO = ₹18 lakh − ₹12 lakh = ₹6 lakh. As per the provisions, this ₹6 lakh is deemed to have been applied to purposes other than the RNPO's registered charitable or religious purpose. Result: Only the ₹12 lakh shown in the printing press's own accounts is treated as regular income eligible for the RNPO's 85% application computation. The ₹6 lakh excess determined by the AO is treated as specified income under Section 337 and taxed at a flat 30% for tax year 2027, the year to which the income relates, regardless of how the RNPO may have intended to apply it. Note: Repeated cases of the AO assessing specified income (other than those arising from a bona fide difference in computation), under Section 337 may lead to a questioning of the charitable status of the RNPO. Restriction on Commercial Activities by a Registered Non-profit Organisation (Section 345) The thumb rule is that an RNPO (other than an RNPO carrying out advancement of any other object of public utility) may carry out commercial activity only if the following two conditions are fulfilled: Such commercial activity is incidental to the attainment of the objectives of the RNPO; and Separate books of account are maintained for such activities: Separate books of account require the income and expenses of the business activity to be recorded clearly and separately from the RNPO’s other accounts. This means that anyone reviewing the accounts should be able to identify what the business earned and spent on its own, without those amounts being mixed with the RNPO’s other funds. What Does Incidental Mean? A business activity is "incidental" to an RNPO's objectives if the money it earns is genuinely used to fund those objectives, even if the activity itself has nothing to do with what the RNPO actually does on the ground. The Supreme Court explained this principle in CIT vs. Thanthi Trust (2001). The trust owned and operated a Tamil-language newspaper, while its charitable objectives were to promote education by running schools, hostels and scholarship programmes. Although newspaper publishing was not, in itself, an educational activity, the Court held that the business was incidental to the trust's educational objectives because its surplus was legally required to be applied towards those charitable purposes. The Court emphasised that the test is not whether the business activity itself is charitable, but whether it is carried on to support and finance the RNPO's charitable objectives. Restriction on Commercial Activities by RNPOs carrying out advancement of Any Other Object of General Public Utility (Section 346) An RNPO, carrying out advancement of any other object of general public utility, may carry out any commercial activity only if the following three conditions are fulfilled: Such commercial activity is undertaken in the course of actual carrying out of advancement of any object of the general public utility; The aggregate receipts from such commercial activity or activities do not exceed 20% of the total receipts of such RNPO of the relevant tax year; and Separate books of account are maintained by such RNPOs for such activities. Note: Sections 345 and 346 both deal with business or commercial activities carried on RNPOs. However, they apply to different categories of RNPOs. Under the Income Tax Act, an RNPO may be established for charitable purposes, religious purposes, or both. Among charitable purposes, the Act recognises following seven categories: - Relief of the poor: Helping needy, poor, or disadvantaged people. - Education: Running schools, colleges, or training programs. - Yoga: Teaching and promoting yoga practices. - Medical relief: Providing healthcare, hospitals, or medical aid. - Preservation of the environment: Protecting forests, wildlife, and watersheds. - Preservation of monuments: Saving places or objects of historic or artistic interest. - General public utility Section 345 lays down the general rule for RNPOs carrying out charitable or religious activities. It permits an RNPO to carry on a business undertaking, provided the business is incidental to the attainment of its objectives and separate books of account are maintained. Section 346 is a special provision that applies only to RNPOs whose charitable purpose is the advancement of any other object of general public utility. Since organisations in this category are more likely to undertake activities that resemble commercial businesses, the Act imposes an additional safeguard. Besides maintaining separate books of account, the receipts from such commercial activities must not exceed 20% of the RNPO's total receipts during the tax year. In other words, Section 345 provides the general framework for business activities carried on by RNPOs, while Section 346 prescribes stricter conditions for RNPOs pursuing the charitable purpose of general public utility. Identifying a General Public Utility (GPU) Object The Income Tax Act, 2025 does not define the expression "general public utility." Over the years, the courts have evolved the following guiding principles to determine whether an RNPO falls within this category. The Primary Charitable Purpose of the RNPO is What Matters Whether an RNPO is regarded as pursuing a GPU object depends on its primary charitable purpose. The focus is on the purpose for which the RNPO was established, rather than on individual activities that it may undertake in carrying out that purpose. Illustration: A university may publish journals, organise seminars and conduct teacher training programmes. These activities do not change its primary charitable purpose, which remains education. Similarly, an RNPO should be classified based on its primary charitable purpose, rather than on every activity it undertakes. The Object Must Benefit the Public The object must promote the welfare of the general public or a sufficiently identifiable section of the public, rather than serving individual interests. GPU is a Residuary Category "Object of general public utility" indicates that this category is intended to cover charitable purposes that do not fall within the other six recognised charitable purposes. This understanding flows from the statutory language and has been recognised by the Supreme Court while interpreting the scope of GPU. Judicial Support: Addl. CIT vs. Surat Art Silk Cloth Manufacturers' Association (1980). Applying the Judicial Principles - Illustrative Examples RNPO's Dominant Object Likely Classification Running schools Education Running hospitals Medical relief Scholarships for disadvantaged students Education Relief and rehabilitation of disaster victims Relief of the poor Preservation of forests and wildlife Preservation of environment Promotion of trade and industry General Public Utility Professional regulation (e.g. ICAI) General Public Utility Note: The table only illustrates the likely classification of an RNPO's dominant object under the recognised charitable purposes. Whether the RNPO qualifies for exemption depends on compliance with the other applicable provisions of the Act, including Sections 345 and 346. Conclusion Commercial activities do not automatically deprive an RNPO of the tax benefits available under the Income Tax Act, 2025. However, the Act subjects such activities to specific conditions. An RNPO may hold a business undertaking as part of its property, but the income from that business qualifies for exemption only where the statutory conditions are satisfied. For RNPOs carrying out charitable or religious purposes, the business activity must be incidental to the attainment of their objectives and separate books of account must be maintained. RNPOs established for the advancement of any other object of general public utility are subject to an additional restriction: i.e. that receipts from commercial activities must not exceed 20% of their total receipts. These provisions seek to ensure that commercial activities remain a means of supporting charitable purposes, rather than becoming an end in themselves. This issue is the fourth part in a seven-part series on the Income Tax Act, 2025, effective 1 April, 2026. Read the Previous Issues in This Series: Part 1: Registration of Non-Profit Organisations under the Income Tax Act, 2025 Part 2: Classification of Income of Registered Non-profit Organisations (RNPOs) under the Income Tax Act, 2025 Part 3: Application of Income of RNPO: What Expenditure Qualifies as Application of Income Towards RNPO’s Charitable/Religious Purposes Part 4: What Commercial Activities Are Permitted for a Registered Non-profit Organisation (RNPO) under the Income Tax Act, 2025 Part 5: Compliance Requirements Applicable to an RNPO Part 6: Violations, Registration Cancellation, and Tax Consequences for RNPOs Part 7: Tax Deduction for Donors and Mergers of RNPOs under the Income Tax Act, 2025

RESEARCH REPORTS T H E M A T I C S Disability Education Gender Philanthropy Technology Pacta’s Comments on the Draft Rights of Persons with Disabilities (Amendment) Rules, 2026 READ REPORT Disability, Technology Pacta’s comments on the Draft Rights of Persons with Disabilities (Amendment) Rules, 2026 identify gaps in the proposed grievance redressal mechanism and recommend a clearer, convergence-based approach to accessibility complaints. The Landscape of Funding for Disability in India READ REPORT Disability This first-of-its-kind study maps the funding landscape for the disability sector in India, examining how resources currently flow, where gaps persist, and the structural factors shaping access to funding. It brings together insights from NPOs, funders, and intermediaries to identify opportunities for more equitable and sustained support. Disability-inclusive Budgeting - Key Recommendations for the Union Budget 2026-27 READ REPORT Disability A report outlining evidence-based recommendations for making the Union Budget 2026-27 more responsive to persons with disabilities, based on consultations convened in collaboration with the Politics and Disability Forum. Towards a Unified, Scalable Ecosystem for the Disability Sector READ REPORT Disability Pacta partnered with Tech Mahindra Foundation as the research partner for a pioneering initiative, The Ability Network (TAN). This report captures its development as a digital-first, collaborative ecosystem to bridge critical gaps in services, information, and support for persons with disabilities and their caregivers in India. Data Insights on Decisions of India’s Chief Commissioner for Persons with Disabilities in 2024 READ REPORT Disability A quantitative analysis of orders passed by India's Chief Commissioner for Persons with Disabilities in 2024. Disability Budgets in India 2021-2026 READ REPORT Disability A study tracking federal allocations and spending patterns for disability budgets in India from 2021 to 2026. CSR and Sports in India-The First Decade READ REPORT Philanthropy A report contouring trends and patterns in CSR funding for Sports in India from the year 2014-2023. Access to Justice for Persons with Disabilities: A Data-Informed Report READ REPORT Disability The report examines the systemic absence of disability-disaggregated data across the justice system. The absence of data serves as a proxy for the invisibility of persons with disabilities across the system’s four key pillars: police, judiciary, legal aid, and prisons. AI Adoption in Indian Social Sector Programs: Early Insights, Emerging Stakeholders and Future Directions READ REPORT Technology The report explores the motivations, models, risks, and practical realities of AI deployment in non-profit programmes. State of Unique Disability Identity Implementation in Uttar Pradesh and Madhya Pradesh READ REPORT Disability A study landscaping the state of challenges pertaining to UDID in Uttar Pradesh and Madhya Pradesh. Data Protection for Children–Pathways towards Implementing Intentions of the DPDP Act READ REPORT Technology An in-depth analysis of the legal, technical, and ethical challenges in protecting children’s personal data under the Digital Personal Data Protection Act, 2023. India Justice Report 2025: Ranking States on the Capacity of Police, Judiciary, Prisons and Legal Aid READ REPORT Disability 'Data Disabled', featured in the India Justice Report 2025 (pp. 164–172), examines the systemic absence of disability-disaggregated data in India’s justice system and calls for an urgent shift toward inclusive data practices. Verifiable Parental Consent: DPDP Act and Rules READ REPORT Technology A white paper on verifiable parental consent under the DPDP Act, 2023 exploring challenges in digital consent for children. State of Unique Disability Identity Implementation in Telangana READ REPORT Disability A study landscaping the state of challenges pertaining to UDID in Telengana. Kimaya's Home READ REPORT Disability A graphic novel inspired by a study on legal guardianship, offering a glimpse into Kimaya's life as a neurodiverse person, exploring autonomy and independence. State of Unique Disability Identity Implementation in Maharashtra READ REPORT Disability A study landscaping the state of challenges pertaining to UDID in Maharashtra. Strengthening the Implementation of India’s National Disability Pension Scheme READ REPORT Disability A policy memo analysing pathways to strengthen the implementation of India's National pension Scheme for Persons with Disabilities. Tracing the Budgetary Allocations for Disability Sector in India READ REPORT Disability A study scoping out disability budget allocations over nine years until 2024. Impact of Covid-19 on Inclusive-Education READ REPORT Disability, Education A research paper mapping the impacts of the Covid-19 Pandemic on the state of inclusive education for children with disabilities in rural and urban Karnataka. Delivering Justice Solutions to Persons with Disabilities through Online Dispute Resolution Platforms READ REPORT Disability An academic paper proposing a framework of an inclusive online dispute resolution (ODR) platform in service of persons with disabilities. Data Insights on Decisions of India's Chief Commissioner for Persons with Disabilities in 2022 READ REPORT Disability A quantitative analysis of 350+ orders passed by India's Chief Commissioner for Persons with Disabilities in 2022. State Of Special Educators in India READ REPORT Disability, Education A quantitative analysis of the state of inclusive education and special educators in India based on UDISE Data 2022-23, reflecting a significant shortage of special educators. Data Insights on Decisions of India's Chief Commissioner for Persons with Disabilities in 2023 READ REPORT Disability A quantitative analysis of 350+ orders passed by India's Chief Commissioner for Persons with Disabilities in 2023. Early Analysis of Disability Data Gaps READ REPORT Disability An overview of disability data gaps in India across federal level data sets such as census and other national statistical surveys. Disability Budgets in India: Tracking Allocations & Spending Patterns READ REPORT Disability A study scoping out disability budget allocations over eight years until 2023. Anti-Sexual Harassment Laws & Classical Arts READ REPORT Gender An examination of the implementation effectiveness of anti-sexual harassment laws in the classical arts in India. Implications of the Digital Personal Data Protection Act 2023 on Persons with Disabilities READ REPORT Technology An examination of the potential impact of India's Digital Personal Data Protection Act 2023 on persons with disabilities in India - based on a survey of ~100 persons with disabilities. Legal Guardianship for Persons with Intellectual and Developmental Disabilities READ REPORT Disability An exploratory study on lived experiences and challenges surrounding legal guardianship laws for persons with intellectual and developmental disabilities and their care-givers in India. State of Unique Disability Identity Implementation in Karnataka READ REPORT Disability A study landscaping the state of challenges pertaining to UDID in Karnataka. Towards Enhancing Data Utility and Accessibility for Schools READ REPORT Education, Technology A study mapping data practices in the school education sector in India to identify pathways that strengthen utility and accessibility of data to serve better student outcomes and moving away from data as a tool for oversight and punishment. Digitization and the Future of Work READ REPORT Technology Explores the impact of digitalisation, AI, and automation on labor, highlighting challenges, opportunities, and policy recommendations for an equitable future of work in the aftermath of Covid - 19 pandemic. Corporate Social Responsibility and Sexual and Gender Minorities READ REPORT Philanthropy, Gender Building the Bridge A Study of the Status of CSR in India for LGBTQ+ Initiatives. Data Driven Anti Competitive Practices of Food Services Aggregators in India READ REPORT Technology Study to address shifts in the digital food delivery economy, changes in Food Service Aggregators' strategies, and their anti-trust data practices, in the context on India's Competition Act. CSR and Sports in India: Emerging Trends and Implications READ REPORT Philanthropy A report contouring trends and patterns in CSR funding for Sports in India from the year 2014-2021. Evaluation of Public Parks in Bengaluru: Are They Inclusive for Children With Disabilities? READ REPORT Disability Assessment of accessibility and inclusiveness of 30+ public parks in Bengaluru for children with disabilities, providing evidence-backed findings to guide improvements in accessibility and thereof inclusivity. Tuberculosis and Disability - A Rapid Assessment Report READ REPORT Disability First ever systematic scoping of experience of persons with disability across the case cascade of tuberculosis treatment in India. Exploratory Study to Assess the Implementation of Laws on Promoting Gender Equality in the Corporate Sector in India READ REPORT Gender A report on the implementation effectiveness of three laws to strengthen gender equality in the Indian corporate sector.

PRIMERS T H E M A T IC S Education Gender Legal Philanthropy Technology Compliance Calendar 2026-2027 Comprehensive compliance calendar for non-profit organisations for various statutory filings for the financial year 2026-2027. READ MORE DPDP Primer for Non-profits A primer guiding NPO leaders to prepare for compliance with India's Digital Personal Data Protection Act, 2023 and Rules, 2025. READ MORE Funders' Playbook : For Supporting AI Adoption by Non-profits in India The playbook equips funders to enable mission-driven, context-sensitive, and responsible AI adoption. It outlines key risks, opportunities, and actionable approaches funders can take to strengthen non-profits’ capacity for AI-led innovation. READ MORE Compliance Calendar: 2025-2026 Comprehensive compliance calendar for non-profit organizations for various statutory filings for the financial year 2025-2026. READ MORE Primer for Non-profit Organisations on the Maternity Benefit Act, 1961 A primer to guide NPOs in understanding and complying with the Maternity Benefit Act, 1961. READ MORE Fair Working Conditions for Platform Gig Workers in India A primer scoping out legal rights and fair working conditions for gig workers in India. READ MORE Manual on Legal Rights for Female Sex Workers in India A primer guiding trainers in community based organisations to build capacity on rights and law pertaining to female sex workers in India. READ MORE Mitigating Legal and Ethical Risks for non-profits in use of AI A primer to equip NPO leaders with implementable strategies to mitigate legal and ethical risks from using AI. READ MORE Digital Data Protection & Consent Protocols for Persons with Disabilities A primer scoping out data protection practices pertaining to persons with disability across nine countries including United States, Australia, Singapore, United Kingdom and India in the wake of India's Digital Personal Data Protection Act, 2023. READ MORE Manual on Legal Rights of LGBTQIA Persons in India A primer guiding trainers in community based organisations to build capacity on legal rights of the LGBTQIA + community in India. READ MORE Regulatory Landscape for Internationalizing Indian Higher Education A primer guiding education initiatives to leverage UGC Regulations and guidelines on Internationalisation of higher education. READ MORE UGC SEDGS Guidelines A primer on the Guidelines for Equitable Opportunity to the Socially Disadvantaged Groups (SEDGs) in Higher Education Institutions. READ MORE Social Stock Exchange: A Primer for non-profits A primer to help NPOs list and raise funds on the Indian Social Stock Exchange. READ MORE

OP-EDS IDR FCRA Amendment Bill, 2026: How does it affect nonprofits? 17 Apr 2026 Read More LSE Data Collection and Utilisation in India’s Educational Ecosystem 13 Aug 2025 Read More Medianama How India’s Data Protection Law Infantilises Persons with Disabilities 11 Feb 2025 Read More IDR Where India’s disability pension scheme falls short 5 Sept 2023 Read More IDR No budget for persons with disabilities in India 14 Apr 2023 Read More Economic Times An Exploratory Research Study on Implementation of 3 Gender Equality Laws in the Corporate Sector in India 20 Mar 2023 Read More IDR Platform co-ops: Democratising the digital economy 20 Jan 2023 Read More IDR Rethinking nonprofit compliance as strategy, not obligation 9 Apr 2026 Read More Sportanddev.org Corporate social responsibility in Indian sport: Moving from margins to mainstream 1 Jul 2025 Read More Scroll.in How the new digital data protection rules infantilise people with disabilities 17 Jan 2025 Read More IDR Dropping questions on disability from NFHS-6 is a mistake 23 Jul 2023 Read More Economic Times Board Rooms Need More Women 27 Mar 2023 Read More IDR Not all disabled students in India are treated equally 15 Mar 2023 Read More The Institute of Company Secretaries of India Chartered Secretary: The Journal for Governance Professionals 1 Sept 2021 Read More EPW When Data Meets Power: Why Indian NGOs Need Robust Data Governance before Embracing AI 21 Feb 2026 Read More The Hindu Why are PwDs worried about DPDP rules? | Explained 28 Feb 2025 Read More IDR What nonprofits need to know about Form 10BD 23 May 2024 Read More Economic Times How funding choices can lead to an oligopoly of non-profits, and how to avoid it 16 May 2023 Read More Economic Times India Inc, Game Face On 20 Mar 2023 Read More Economic Times How CSR funding in sports can accelerate change 8 Mar 2023 Read More IDR Inclusive education for children with disabilities during COVID-19 27 Apr 2021 Read More