Income Tax Act

Official PDF pages 426–430

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( a )   income applied outside India, where the Board, by general or special
order, directs that such income shall not be so included in its total income
in case of a registered non-profit organisation—
( i )   created before the 1st April, 1952 for charitable or religious pur -
poses; or
( ii )   created on or after the 1st April, 1952 for charitable purposes
where such application of income outside India tends to promote
international welfare in which India is interested;
( b )   the corpus donation received by the registered non-profit organisation
under section 339.
Corpus donation.
339.   Corpus donation means any donation made with a specific direction by the
donor that it shall form part of the corpus of the registered non-profit organ -
isation provided that such donation is invested or deposited in any of the modes
permitted under section 350 maintained specifically for such corpus.
Deemed corpus donation.
340.   Where the property of a registered non-profit organisation includes any
temple, mosque, gurudwara, church or other place notified under section
133(1)( b )( vi ), any sum or sums received by such registered non-profit organisation
as donation for the purpose of renovation or repair of such temple, mosque, gurud -
wara, church or other place, may, at its option, be deemed as forming part of the
corpus under section 339, if it—
( a )   maintains such corpus as separately identifiable;
( b )   applies such corpus only for the purpose for which the donation was
made;
( c )   invests or deposits such corpus in any of the modes permitted under
section 350; and
( d )   does not apply such corpus for making donation to any person.
Application of income.
341.   (1) The following sums shall be allowed as application of income to a
registered non-profit organisation:—
( a )   any sum, other than the sum referred to in clause ( b ), applied by it for
charitable or religious purpose in India for which it is registered where
such sum is paid during the tax year provided that the provisions of
section 35( b )( i )   and section 36(4), (5), (6) and (7)   shall apply in respect
of such sum; and
( b )   85% of the sum paid by way of donation made to any other registered
non-profit organisation.
(2) The application of income under sub-section (1) shall include the following:—
( a )   the amount invested or deposited back during the tax year, in the modes
permitted under section 350 maintained specifically for such corpus, if—
( i )   such investment or depositing back is made within five years from
the end of the tax year in which such application of income was
made from the corpus; and

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( ii )   the application of income from the corpus is made after the 31st
March, 2021 and there was no violation of any provision of this
Part, or any corresponding provision of the Income-tax Act, 1961
(43 of 1961) with respect to such application;
( b )   the amount repaid, during the tax year, towards any loan or borrowing
where,—
( i )   such repayment is within five years from the end of the tax year
in which such application of income was made from the loan or
borrowing; and
( ii )   the application of income from the loan or borrowing is made after
the 31st March, 2021 and there was no violation of any provision
of this Part, or any corresponding provision of the Income-tax Act,
1961 (43 of 1961) with respect to such application.
(3) The following claims shall not be allowed as application of income under
sub-sections (1) and (2):—
( a )   the deduction or allowance by way of depreciation or otherwise   claimed
in respect of an asset acquisition of which has been claimed as an ap -
plication of income in the same or any other tax year under this Part or
under any corresponding provision of the Income-tax Act, 1961 (43 of
1961); or
( b )   a claim of set off or deduction or allowance of any excess application of
any of the years preceding the tax year; or
( c )   any sum paid as a corpus donation to any other registered non-profit
organisation.
(4) An application from corpus, loan or borrowing, accumulated income, specified
income or deemed accumulated income shall not be considered as application for
the purpose of sub-sections (1) and (2).
(5) Where, in a tax year, the regular income applied by a registered non-profit
organisation towards charitable or religious purposes in India, as per the provisions
of sub-sections (1) to (4), is less than 85% of regular income, the shortfall, or any
part thereof, at the option of the registered non-profit organisation, may be treated
as deemed application.
(6) Any deemed application under sub-section (5) shall be applied by the registered
non-profit organisation for its objects in India,—
( a )   during the tax year in which the income is received or in the tax year
immediately succeeding such tax year, where such shortfall is for the
reason that the whole or any part of the income has not been received
during that tax year;
( b )   in the tax year immediately succeeding the tax year in which the income
was derived, where such shortfall is for any other reason.
(7) The option under sub-section (5) shall be exercised on or before the due date
specified in section 263(1)   for furnishing the return of income for such tax year, in
such form and manner, as may be prescribed.

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(8) The application of income under sub-section (1) shall include deemed applica -
tion under sub-section (5).
(9) Following income from capital gains shall be deemed as application of income—
( a )   the capital gain from transfer of a capital asset, being property held un -
der trust wholly for charitable or religious purposes, where the whole or
any part of the net consideration is utilised for acquiring another capital
asset to be so held,—
( i )   if the whole of the net consideration is utilised in acquiring the new
capital asset, the whole of such capital gain;
( ii )   if only a part of the net consideration is utilised for acquiring the
new capital asset, so much of such capital gain as is equal to the
amount, if any, by which the amount so utilised exceeds the cost
of the transferred asset;
( b )   the appropriate fraction of the capital gain arising from the transfer of
a capital asset, being property held under trust in part for charitable or
religious purposes, where the whole or any part of the net consideration
is utilised for acquiring another capital asset to be so held,—
( i )   if the cost of acquisition of the new capital asset acquired is not less
than the net consideration in respect of the capital asset transferred,
the whole of appropriate fraction of such capital gain;
( ii )   in any other case, so much of the appropriate fraction of the capital
gain as is equal to the amount, if any, by which the appropriate
fraction of the amount utilised for acquiring the new asset exceeds
the appropriate fraction of the cost of the transferred asset.
(10) For the purposes of sub-section (9),—
( a )   “appropriate fraction” means the fraction which represents the extent to
which the income derived from the capital asset transferred was imme -
diately before such transfer applicable to charitable or religious purpose;
( b )   “cost of transferred asset” means the aggregate of the cost of acquisition
(as ascertained for the purposes of sections 72 and 73) of the capital
asset which is subject of the transfer and the cost of any improvement
thereto within the meaning assigned to that expression in section
90(1)( b );
( c )   “net consideration” means the full value of the consideration received
or accruing as a result of the transfer of the capital asset as reduced by
any expenditure incurred wholly and exclusively in connection with such
transfer.
Accumulated income.
342.   (1) A registered non-profit organisation may accumulate or set apart any part
of its regular income during any tax year by furnishing a statement to the
Assessing Officer in such form and manner, as may be prescribed, on or before the
due date specified in section 263(1)   for furnishing the return of income for such tax

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year stating therein the purpose and period, not exceeding five years, for which the
income is being accumulated or set apart.
(2) The amount credited or paid by a registered non-profit organisation to any other
registered non-profit organisation out of its income accumulated or set apart, shall
not be treated as application of income.
(3) The period during which the income is not applied for the purpose for which
it is so accumulated or set apart pursuant to an order or injunction of any court,
shall be excluded from the said period of five years.
(4) The income accumulated or set apart under sub-section (1) shall be invested
or deposited in any of the modes permitted under section 350, or applied for the
purposes as stated in the prescribed form referred to in sub-section (1).
(5) The registered non-profit organisation may, for the change of purpose for which
income has been accumulated or set apart, make an application to the Assessing
Officer, in such form and manner, as may be prescribed.
(6) The Assessing Officer may, on an application made under sub-section (5) and
subject to sub-section (2), allow the registered non-profit organisation to apply its
income for such other charitable or religious purposes in India which are in con -
formity with its objects.
(7) Where a registered non-profit organisation is dissolved, the Assessing Officer
may, on an application made by such registered non-profit organisation in such form
and manner, as may be prescribed, allow application of such income to be made
to any other registered non-profit organisation for the year in which it is dissolved.
Deemed accumulated income.
343.   (1) The regular income, as reduced by the application of income as per the
provisions of section 341 and accumulated or set apart income under section
342, to the extent of 15% of regular income, shall be considered as deemed accumu -
lated income and where such deemed accumulated income is invested or deposited,
it shall be invested or deposited in any of the modes permitted under section 350.
(2) The deemed accumulated income under this section shall not be considered as
accumulated income for the purposes of section 342.
3. —Commercial activities by registered non-profit organisation
Business undertaking held as property.
344.   W  here the property held by a registered non-profit organisation includes
a business undertaking, and where a claim is made that the income of any
such undertaking is eligible for benefits under this Part, then the Assessing Officer
shall have the power to determine the income of such business undertaking as per
the provisions of this Act.
Restriction on commercial activities by a registered non-profit organisation.
345.   A registered non-profit organisation (other than a registered non-profit
organisation mentioned in section 346) shall not carry out any commercial
activity unless—

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( a )   such commercial activity is incidental to the attainment of the objectives
of the registered non-profit organisation; and
( b )   separate books of account are maintained for such activities.
Restriction on commercial activities by registered non-profit organisation,
carrying out advancement of any other object of general public utility.
346.   No registered non-profit organisation, carrying out advancement of any
other object of general public utility, shall carry out any commercial activity
unless,—
( a )   such commercial activity is undertaken in the course of actual carrying
out of advancement of any object of the general public utility;
( b )   the aggregate receipts from such commercial activity or activities do not
exceed 20% of the total receipts of such registered non-profit organisation
of the relevant tax year; and
( c )   separate books of account are maintained by such registered non-profit
organisation for such activities.
4. —Compliances
Books of account.
347.   Where the total income of a registered non-profit organisation, without
giving effect to the provisions of this Part, exceeds the maximum amount
which is not chargeable to income-tax in any tax year, such registered non-profit
organisation shall be required to keep and maintain the books of account and other
documents in such form and manner and at such place, as may be prescribed.
Audit.
348.   Where the total income of a registered non-profit organisation, without
giving effect to the provisions of this Part, exceeds the maximum amount which
is not chargeable to income-tax in any tax year, the accounts of such registered
non-profit organisation for that tax year shall be audited by an accountant and the
person in receipt of the income shall be required to furnish a report of an audit of
such income by such date in the prescribed form, duly signed and verified by such
accountant and setting forth such particulars, as may be prescribed.
Return of income.
349.   Where the total income of a registered non-profit organisation, without giving
effect to the provisions of this Part, exceeds the maximum amount which is
not chargeable to income-tax in any tax year, it shall furnish the return of income
for that tax year as per the provisions of section 263(1)( a )( iii ) and (2), within   the
time limit allowed under section 263(1)( c )  
65
[ or 263(4) ] .
Permitted modes of investment.
350.   (1) The modes of investing or depositing the money under this Part, shall be
such as specified in Schedule XVI.
65.   Inserted by the Finance Act, 2026, w.e.f.   1-4-2026 .