[Opinion] Income Tax Bill, 2025 | Insight Into the Law Relating to Charity Institutions

Dindayal Dhandaria – [2025] 172 taxmann.com 256 (Article)

Introduction

In her Budget speech on July 23, 2024, Finance Minister Nirmala Sitharaman announced a comprehensive review of the Income Tax Act, 1961, with the purpose of making it concise, lucid, and easy to read and understand. She emphasized that this initiative aimed to reduce disputes and litigation, thereby providing tax certainty to taxpayers. Accordingly, Income Tax Bill, 2025 (“ITB”) was introduced in Parliament on 13-02-2025 which is set to take effect from April 1, 2026.

Earlier, the provisions relating to Non-Profit Organization (NPO) were scattered across various sections in the Act. The Bill consolidates the same in Chapter XVII-B – Special Provisions for registered non-profit organisation. which comprises of sections 332 to 355, covering the following aspects in seven sub-chapters, viz.:

1. Registration
2. Income of registered non-profit organisation
3. Commercial activities
4. Compliances
5. Violations
6. Approval for purpose of deduction under section 133(1)(b)(ii)
7. Interpretation

The Author aims to write a series of articles with a view to giving a comparative and chapter-wise insight into the provisions relating to non-profit organizations, as contained in the proposed ITB. In this Part I of the article, the provisions relating to “Registration” contained in sub-chapter 1 are stated and more to follow.

Part 1 – A Comparative Analysis of Registration Provisions for Charity Institutions

1. Registration

This sub-chapter consists of two sections viz. 332 and 333.

Section 332(1):

The Law:

This sub-section enumerates the persons who may apply for registration in the prescribed form and manner to the Principal Commissioner or Commissioner, for claiming benefits under this part. These persons are collectively referred to as “registered non-profit organisation”.

A lengthy list of various Trusts, Societies, Funds, Institutions, Regulatory and Development Authorities, Universities, Hospitals, etc. enjoyed exemption under sections 10 and 11 of the earlier Act. A glimpse thereof (not exhaustive) is given herein below:

1. A Public Trust,
2. A Society registered under the Societies Registration Act, 1860
3. A company registered under section 8 of the Companies Act, 2013 or the companies registered under section 25 of the Companies Act, 1956 and deemed to have been registered in pursuance of section 465(2)(g) of the Companies Act, 2013.
4. A University established by law or any other educational institution affiliated thereto or recognised by the Government.
5. An Institution financed wholly or in part by the Government or a local authority.
6. An Investor Protection Fund as specified in Sl. No. 27 to 29 of Schedule III.
7. A Body or Authority or Board or Trust or Commission established under a Central or State Act for regulating any activity for the benefit of the general public which is not engaged in any commercial activity and is notified by the Central Government (Sl. No. 36 of Schedule iii).
8. Various Funds listed in sl. No. 10 to 19 of Schedule VII. e.g. Prime Ministers’ National Relief Fund, Swachh Bharat Kosh, Clean Ganga Fund, etc.
9. Any University or other educational institution existing solely for educational purposes and not for profit and any Hospital or other institution existing solely for philanthropic purposes and not for profit and the aggregate annual receipts of any one of these or all of them do not exceed Rs. 5 crores.
10. A Body or Authority or Board or Trust or Commission, not being a company, which has been established or constituted by or under a Central Act or State Act with one or more of the following purposes, —
    (a) dealing with and satisfying the need for housing accommodation.
    (b) planning, development or improvement of cities, towns and villages.
    (c) regulating, or regulating and developing, any activity for the benefit of the public; or
    (d) regulating any matter, for the benefit of the public, arising out of the object for which it has been created.
11. Any other person notified by the Board.

Author’s comments:

It is a welcome step and would be convenient to refer to the above lengthy list of persons as non-profit organizations (NPOs).

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