Income Tax Act 2025 & Draft IT Rules 2026 for Charitable institutions - Part II

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Session Layout – Session 2

Session 1 contd. Cross walk of Sections and Forms from existing to new Act and Rules Forms & Proceedings How to begin being compliance ready

133(1)(b)(ii) – Deduction in respect of donations to certain funds, charitable institutions, etc. (erstwhile Section 12A

80G)

Conditions

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 Applicabilitya charitable purpose; and

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

All provisions of Section 1180G &are 12aligned

Thewith provisionsSection 133 – i.e. represented in money, cash not >2k, statement of sectiondonation 11verified as per risk mgt strategy

 

6. Approval for Purpose of Deduction under Section 133(1)(b)(ii)

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

Not for benefit of particular religious caste/community For charitable purpose and sectioncan 12incur shallupto not apply in relation to the income of any trust or institution unless the organization is registered under section 12AB.

Books of accounts of the organization have been maintained and audited by the Chartered Accountant.

Income derived from property held under Trust has furnished the return5% of income for religious purpose

Constitution instrument does not permit transfer of assets for other than charitable purpose 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

Table for Various Approvals u/s 133(1)(b)(ii)

Sl. No. Case Time limit for furnishing application Time limit for passing order Validity of registration 1 Where the previousactivities of the applicant 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 application is made. Three tax years commencing from the tax year in accordancewhich withsuch application is made. 2 Where the provisions of sub-section (4A) of section 139, within the time allowed under that section.

Section 13

Section 13(1)

Section 11 not to apply when:

Trust for private religious purposes which does not ensure for the benefitactivities of the public.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 non-profit 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.

6. Approval for Deduction under Section 133(1)(b)(ii) (continued)

Application made to P/CIT for approval as per Table TrustFor sl 2-5 in Table P/CIT call for charitableinformation purposesand pass order

for approval if activities are genuine and it abides with any other laws Reject and communicate P/CIT only pass order for provisional approval

354A – merger of two RNPOs with same/similar objects fulfilling conditions (12AC of ITA 1961) to be tax neutral – Budget 2026

 

7. Interpretation

355 – Interpretation

(a) anonymous donation – voluntary contribution where incomename forand address of donor not known

(b) approval – approval under 80G of IT Act 1961 or section 354 of ITA 2025

(c) Donation – any voluntary contribution received by RNPO

(d) "commercial activity" means any activity in the benefitnature of anytrade, particular religious communitycommerce or caste.

If any part of incomebusiness, or any propertyactivity of a charitable or religious trust or institution (whenever created or established) is during the previous year used or applied, directly or indirectly, for the benefit ofrendering any person referred to in sub-section (3). Non-compliance of Section 11(5) - permitted modes of investment.

Section 13(6)

The exemption under section 11 or section 12 shall not be deniedservice in relation to any income,trade, commerce or business, for a cess or fee or any other thanconsideration, 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 sub-sectionsections (2) of section 12, by reason only that such trust has provided educational10(23C) or medical facilities to persons referred to in sub-section 3.

S. 115BBI - Tax @30% on denied income for 13(12AB(1)(c) and 13(1)(d) violations. Penalty for providing unreasonable benefits to specified persons - s 271AAE penalty equal to amount of benefit in first year and twice for subsequent year.

Section 13(3)

List of persons:

The author of the trustIncome-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 cancelled

(g) "related person" means any of the following persons:—

(i) the author or the founder of the institution.

registered Anynon-profit organisation;

(ii) any person whowhose has made a substantialtotal contribution to such registered non-profit organisation, during the trustrelevant ortax institution,year i.e.,exceeds totalone contributionlakh rupees, or, in aggregate up to the end of the relevant previoustax year exceeds fifty thousand rupees.

Increased to Rs. 1ten lakh inrupees, that PY and aggregate Rs. 10 lakhs duringas the lifetimecase ofmay thebe; institution

(iii) by Finance Act 2025.

Wherewhere such author, founder,founder or person is a Hindu undivided family, a member of the family.family; Any

(iv) any trustee of the trust or manager (by whatever name called) of the institution.

registered Anynon-profit organisation;

(v) any relative of any suchpersons author,referred founder,to personin sub-clause (deleted through Finance Act 2025)i), member, trustee(iii) or manager(iv);

as

(vi) aforesaid.

Anyany concern in which any of the persons referred to in sub-clauses (a)i), (b) - deleted in Finance Act 2025,iii) (c),iv) or (cc) and (d)v) has a substantial interest.interest (defined as 20%> voting right/profits)

(h) "Relative",value" inmeans relationthe value of any benefit or facility granted or provided free of cost or at concessional rate to anany individual,related means:person

(i)

Spouse"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 individual.

Income-tax BrotherAct, 1961 or sistersection of332; the

(k) individual.

"wholly Brotherfor charitable or sisterreligious ofpurposes" theshall spousemean ofwholly thefor individual.charitable Any lineal ascendantpurposes or descendantwholly offor thereligious individual. Any lineal ascendantpurposes or descendant of the spouse of the individual. Spouse of a person referred to in sub-clause (b), sub-clause (c), sub-clause (d) or sub-clause (e). Any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.

Section 13(2)

The income or the property of a trust deemed to have been used or applied for the benefit of a person referred to in 13(3):

If any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both. If any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation. If any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services. If the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation. If any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate. If any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate. If any income or property of the trust or institution is diverted during the previous year in favor of any person referred to in sub-section (3).

Computation for exemption:

Determine Income - commercial sense/book income as per books of accounts, not as per heads of income. Reduce Application of incomewholly for charitable and religious purposepurposes. based

Navigator

Sections between ITA 1961 and 2025 Rules between ITR 1962 and ITR 2026 Forms between ITR 1962 and ITR 2026

FAQs also released by CBDT

 

TDS Provisions – Chapter XIX – Collection & Recovery of Tax

392 – TDS on commercial sense.Salary Reduce393(l) 15%– Tax to be deducted at source
Table sl. No. 2(ii). Rent
Table sl. No. 6. (i) Payment to contractors 393(4) Table sl no. 8 carriage of remaininggoods
Table income.sl. No. 6. (iii) fee for professional and technical services
Table sl. No 8(ii) – TDS on purchase of goods
Table sl. No. 8(iv) – TDS for benefits/perquisites In393(2) – TDS for payment to non resident 394 – TCS – sale of tendu leaves – 5%, sale of timber or forest produce under forest lease – 2% 395 – Certificate – for nil/LTDC until validity 398 – Failure to deduct/collect and pay TDS/TCS 427 – Fee for late filing of TDS return (234E) 461 – Penalty for failure to furnish TDS returns (271H) 397(2) – Obligation to provide PAN (206AA) 135 – Application for allotment of TAN (49B) 397(3)(f) – limitation of 2 years from end of tax year only for TDS/TCS correction statements introduced. Correction statements from FY 2018-19 to 2023-24 (Q3) to be made by 31.3.2026 otherwise time barred

Forms –
Form No. 168 – Form 26AS and AIS merged
Form No. 138 – Form 24Q
Form No. 140 – Form 26Q
Form No. 144 – Form 27Q

 

Misc Provisions

Section 186 – Mode of undertaking transaction – (erstwhile 269ST) – Receive Rs.2 lakhs or more from a person in a day/single transaction/transactions for single event/occasion in cash otherwise equivalent amount of penalty as per Section 451 Section 37 – Certain deductions allowed on actual payment basis only – erstwhile Section 43(B)(h) – effective April 2023 requires all payers for timely payments (15-45 days) to registered MSMEs to claim deductions in the same financial year

 

Cross Walk of Sections – Income-tax Act 1961 to Income-tax Act 2025

Section Number of Income-tax Act, 1961 Section heading Section Number of Income-tax Act, 2025 2(15)(Proviso) Definitions. 346 10(23C)(iiiab) Any University or other educational institution wholly or substantially financed by the Govt Schedule VII (Table: S. No. 17) 10(23C)(iiiac) Any hospital or other institution wholly or substantially financed by the Government. Schedule VII (Table: S. No. 18) 10(23C)(iiiad) 10(23C)(iiiae) (a) Any University or other educational institution; (b) any hospital or other institution. Schedule VII (Table: S. No. 19) 10(46) Any income of the nature and to the extent which the Central Government may, by notification, Schedule III (Table: S. No. 36) 11(1)(a) Income from property held for charitable or religious purposes. 336 11(1)(b) Income from property held for charitable or religious purposes. 336 11(1)(c) Income from property held for charitable or religious purposes. 338(a) 11(1)(d) Income from property held for charitable or religious purposes. 338(b) 11(1)(d) Income from property held for charitable or religious purposes. 339 11(1)(Explanation)(1)(1) Income from property held for charitable or religious purposes. 335(c) 11(1)(Explanation)(1)(2) Income from property held for charitable or religious purposes. Omitted 11(1)(Explanation)(2) Income from property held for charitable or religious purposes. 341(1)(c) 11(1)(Explanation)(3) Income from property held for charitable or religious purposes. 341(1)(a)(iii) 11(1)(Explanation)(3A) Income from property held for charitable or religious purposes. 340 11(1)(Explanation)(3B) Income from property held for charitable or religious purposes. 337 (Table: S. No. 5) 11(1)(Explanation)(4)(i) Income from property held for charitable or religious purposes. 341(4) 11(1)(Explanation)(4)(i) (Proviso) Income from property held for charitable or religious purposes. 341(2)(a) 11(1)(Explanation)(4)(ii) Income from property held for charitable or religious purposes. 341(4) 11(1)(Explanation)(4)(ii) (Proviso) Income from property held for charitable or religious purposes. 341(2)(b) 11(1)(Explanation)(4)(iii) Income from property held for charitable or religious purposes. 341(1)(b) 11(1)(Explanation)(5) Income from property held for charitable or religious purposes. 341(3)(b) 11(1A) Income from property held for charitable or religious purposes. Omitted 11(1B) Income from property held for charitable or religious purposes. Omitted 11(2)((a) Income from property held for charitable or religious purposes. 342(1) 11(2)(b) Income from property held for charitable or religious purposes. 342(4) 11(2)(c) Income from property held for charitable or religious purposes. 342(1) 11(2)(Proviso) Income from property held for charitable or religious purposes. 342(3) 11(2)(Explanation) Income from property held for charitable or religious purposes. 342(2) 11(3)(a) Income from property held for charitable or religious purposes. 337 (Table: S. No. 6) 11(3)(b) Income from property held for charitable or religious purposes. 337 (Table: S. No. 4) 11(3)(c) Income from property held for charitable or religious purposes. 337 (Table: S. No. 8) 11(3)(d) Income from property held for charitable or religious purposes. 337 (Table: S. No. 9) 11(3A) Income from property held for charitable or religious purposes. 342(5) 11(3A) Income from property held for charitable or religious purposes. 342(6) 11(3A)(1st Proviso) Income from property held for charitable or religious purposes. 342(2) 11(3A)(2nd Proviso) Income from property held for charitable or religious purposes. 342(7) 11(4) Income from property held for charitable or religious purposes. 344 11(4A) Income from property held for charitable or religious purposes. 345 11(5) Income from property held for charitable or religious purposes. 350 11(6) Income from property held for charitable or religious purposes. 341(3)(a) 11(7) Income from property held for charitable or religious purposes. 333 11(Explanation) Income from property held for charitable or religious purposes. 341(1)(a)(i) 12(1) Income of trusts or institutions from contributions. 335(c) 12(2) Income of trusts or institutions from contributions. 337 (Table: S. No. 2) 12(3) Income of trusts or institutions from contributions. Redundant 12A(1)(ac) Conditions for applicability of sections 11 and 12. 332(3) 12A(1)(ac)(Proviso) Conditions for applicability of sections 11 and 12. 332(4) 12A(1)(ac)(Proviso) Conditions for applicability of sections 11 and 12. 332(9) 12A(1)(b) Conditions for applicability of sections 11 and 12. 347 12A(1)(b) Conditions for applicability of sections 11 and 12. 348 12A(1)(ba) Conditions for applicability of sections 11 and 12. 349 12A(2) Conditions for applicability of sections 11 and 12. 332(3) 12AA Procedure for registration. Omitted 12AB(1) Procedure for fresh registration. 332(7) 12AB(2) Procedure for fresh registration. Redundant 12AB(3) Procedure for fresh registration. 332(3) 12AB(4) Procedure for fresh registration. 351(2) 12AB(4)(Explanation) Procedure for fresh registration. 351(1) 12AB(5) Procedure for fresh registration. 351(3) 12AC Merger of charitable trusts or institutions in certain cases. 352(5) (Table: Sl. No. 8.B) 13(1)(a) Section 11 not to apply in certain case. 351(1)(c) 13(1)(b) Section 11 not to apply in certain case. 351(1)(d) 13(1)(c) Section 11 not to apply in certain case. 337 (Table: S. No. 2) 13(1)(d) Section 11 not to apply in certain case. 350 13(10) Section 11 not to apply in certain case. 353 13(11) Section 11 not to apply in certain case. 353 13(2) Section 11 not to apply in certain case. 337 (Table: S. No. 2) 13(3) Section 11 not to apply in certain case. 355(j) 13(4) Section 11 not to apply in certain case. Redundant 13(5) Section 11 not to apply in certain case. Redundant 13(6) Section 11 not to apply in certain case. Redundant 13(7) Section 11 not to apply in certain case. Redundant 13(8) Section 11 not to apply in certain case. 346 13(9) Section 11 not to apply in certain case. 342(1) 13 Explanation (1) Section 11 not to apply in certain case. 355(i) 13 Explanation (2) Section 11 not to apply in certain case. 351(1)(d) 35 Expenditure on scientific research. 45 40A Expenses or payments not deductible in certain circumstances. 29, 32, 36 80G Deduction in respect of donations to certain funds, charitable institutions, etc. 133 80G(5) Deduction in respect of donations to certain funds, charitable institutions, etc. 354(1) 80G(5)(Proviso) Deduction in respect of donations to certain funds, charitable institutions, etc. 354(2) 80GGA Deduction in respect of certain donations for scientific research or rural development. 135 80GGB Deduction in respect of contributions given by companies to political parties. 136 115BBC Anonymous donations to be taxed in certain cases. 337 (Table: S. No. 1) 115BBI Specified income of certain institutions. 337 115TD Tax on accreted income. 352 115TE Interest payable for non payment of tax by specified person 352 139 Return of Income 263 142 Inquiry before assessment 268 143 Assessment 270 148 Issue of notice where income has escaped assessment 280 154 Rectification of mistake 287 156 Notice of demand. 289 192 Salary TDS 392 194C Payments to contractors. 393(1) [Table: S.No. 6(i)], 393(4) [Table: S.No. 8] 194I Rent. 393(1) [Table: S.No. 2(i) & 2(ii)], 393(4) [Table: S.No. 2] 194-IA Payment on transfer of certain immovable property other than agricultural land. 393(1) [Table: S.No. 3(i)] 194-IB Payment of rent by certain individuals or Hindu undivided family. 393(3) [Table: S.No. 2(ii)] 194-IC Payment under specified agreement. 393(1) [Table: S.No. 3(ii)] 194J Fees for professional or technical services. 393(1) [Table: S.No. 6(iii)], 393(4) [Table: S.No. 9] 194Q Deduction of tax at source on payment of certain sum for purchase of goods. 393(1) [Table: S.No. 8(ii)] 194R Deduction of tax on benefit of perquisite in respect of business or profession. 393(1) [Table: S.No. 8(iv)] 195 Other sums. 393(2) [Table: S.No. 17] 197 Certificate for deduction at lower rate. 395(1) 206AA Requirement to furnish Permanent Account Number. 397(2) 206CC Requirement to furnish Permanent Account Number by collectee. 397(2) 206CCA Special provision for collection of tax at source for non-filers of income tax return Omitted 234E Fee for default in furnishing statements. 427 245 Set off and withholding of refunds in certain cases. 438 269ST Mode of undertaking transactions. 186 270A Penalty for under-reporting and misreporting of income. 439 271H Penalty for failure to furnish statements, etc. 461

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Forms and Proceedings

Forms –

Audit Report – 10B/10BB – Single form 112 ITR 7 continues as such for now 9A (deemed application) – now Form no 108 – application in case of surplusdissolution of10 income– overnow expenditure,Form then:no 109 – Accumulation 10BD – now Form no 113 10BE – now Form no 114

Proceedings –

• OptSection to139 spend– Return of Income now Section 263

Section 142 – Notice by AO for inquiry before assessment now Section 268 Section 143 – Assessment now Section 370 Section 149 – Notice when income inescaped subsequentassessment year.now Section 280 OptSection to154 accumulate– incomeRectification upof tomistake 5by years.AO now Section 287 Section 156 – Demand notice now Section 289 Section 270A – Mis/underreporting penalty now Section 439

Cross Walk of Forms – IT Rules 1962 to IT Rules 2026

Form No. (IT Rules 2026) Form No. (IT Rules 1962) Description 16 New Form Certificate of donation under section 45(4)(a) of the Act 93 49A Application for allotment of PAN (For an individual being Citizen of India) 104 10A Application for provisional registration or provisional approval 105 10AB Application for registration of non-profit organisation under section 332 or approval for deduction under section 133(1)(b)(ii) 106 10AC Order for provisional registration u/s 332 or provisional approval u/s 354 Rejection of application 107 10AD Order for grant of registration under section 332 or approval under section 354 or rejection of application or cancellation of registration or approval granted 108 9A Exercise of option under section 341(7) in respect of amount applied for charitable purpose in case of dissolution 109 10 Accumulation 113 10BD Statement of donation 114 10BE Certificate of donation under section 354(1)(g) of the Act 138 24Q Quarterly statement of deduction of tax under section 397(3)(b) of the Act in respect of salary paid to employee under section 392 140 26Q Quarterly statement of deduction of tax under section 397(3)(b) of the Act in respect of payments made other than salary for the quarter ended (June/September/December/March) 144 27Q Quarterly statement of deduction of tax under section 397(3)(b) of the Act in respect of payments other than salary made to non-residents for quarter 145 15CA Information to be furnished for payments to a non-resident not being a company, or to a foreign company 146 15CB Certificate 168 26AS Annual information statement

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Key Takeaways for NGOs

Neat structuring of provisions, unified definitions for common interpretation, tables/Schedules to make comprehension easy ApplicabilityPerson who can be RNPO specified No new tax Existing registration/approval of incidentalRNPO businessunder ITA 1961 valid Deemed application provision for shortfall in 85% utilization remains. Repurposing of accumulated income andpermitted proviso15% income set apart (deemed accumulated income) to section 2(15). Tax attracted if option in a and b not fulfilled. Benefit to specified persons. Fundsbe put in specified modes of investment - corpus and Accumulation. ProvisionCommercial cannotactivity beprohibited claimedfor asall application,objects actualexcept spend/paymentGPU. only.Other Usethan of corpus funds or loans and borrowings applicationGPU, only ifincidental replenished/repaidbusiness withinincome 5 years. Inter charity donations of local funds - 85% of amount as application. Carry forward of previous years deficit not allowed.permitted

Maintaining

How Booksto ofbe accountsCompliance for NGOs

Ready

• ThereCompliance wasto begin from tax year 2026-27. Now is the time for unlearning-learning

Existing registrations if valid need no regulationfurther regardingaction booksFinance & Compliance teams of accounts for NGOs upneed to FYunderstand 21-22.the structure and navigate flow from ITA 1961 to ITA 2025 SectionFamiliarity 12A(1)(b)(i)with inserteddefinitions, forsections, maintainingtables, Schedules, forms, rules required in the long future Be aware of books of accounts and other documents wef AY 23-24. Not applicable if total income is below threshold chargeable to tax. Rule 17AA inserted from 10.8.2022 providing for four sub-rules.

1. Books of accounts & other documents

The specified books of accounts shall include:

Cash book Ledger Journal Copies of serially numbered receipts, original copy of invoices, etc.

Other documents include:

Record of all the projects and institutions run by the organization. Record of income of the organization during the previous year:

Voluntary contribution containing details of name of the donor, address, permanent account number (if available) and Aadhaar number (if available). Income from property heldviolations under trust referred to under section 11 of the Act along with list of such properties. Income of trust other than the contribution referred in items (I) and (II). Record of application out of the income during the year:

Application of income in India, containing details of amount, name and address of the person and the object for application. Application of income outside India, containing details of amount of application, name and address of the person and the object for which such application is made. Deemed application of income referred in section 11(1) of the Act containing details of the reason for availing such deemed application. Income accumulated or set apart351 as per sectionsub 11(2)part containing6 detailsto ofavoid thecancellation purposeTax on accreted income provisions maybe applied more rigorously Refer to tables for whichregistration suchunder 332, approval under 354, accreted tax under 352 and Specified income hasunder been accumulated.337 MoneyProperty invested or depositedirrevocably in modes specified in 11(5). Money invested or deposited in the forms and modes other than those specified in 11(5). Record of specified application out of the income of preceding years. Record of voluntary contribution with a specific direction to form Corpus:

Details of name of the donor, address, permanent account number and Aadhaar number. Application out of such voluntary contribution referred to in item (I) containing details of amount of application, name and address of the person to whom payment made and the objecttrust for which such application is made. Amount credited or paid towards corpus to 12AB or 10(23C) institution. The modes specified in section 11(5) of the Act in which such voluntary contribution received is invested or deposited. Money invested or deposited in the forms and modes other than those specified in 11(5). Record of contribution received under 80G(2)(b) being treated as corpus. Record of Loans and Borrowings:

Amount and date of loan or borrowing, amount and date of repayment, name of the person from whom loan taken, address of lender, permanent account number and Aadhaar number (if available) of the lender. Application out of such loan or borrowing containing details of amount of application, name and address of the person to whom any credit or payment is made and the object for which such application is made. Application out of such loan or borrowing, received during any previous year preceding the previous year, containing details of amount of application, name and address of the person to whom any credit or payment is made. Repayment of such loan or borrowing (which was applied during any preceding previous year and not claimed as application) during the previous year. Record of properties held by the assessee:

Immovable properties containing details of (i) nature, address of the properties, cost of acquisition, registration documents; (ii) transfer of such properties, the net consideration utilized in acquiring the new capital asset. Movable properties including details of the nature and cost of acquisition of the asset. Record of specified persons, as per section 13(3) of the Act:

Containing details of name, address, PAN and Aadhaar number (if available). Transactions undertaken with specified persons under 13(3) containing details of date and amount of such transaction, nature of the transaction and documents to the effect that such transaction is, directly or indirectly, not for the benefit of suchgeneral specifiedpublic person.maybe Anyincluded otheras document.a

Form of keeping books of accounts and documents: Keptmust in written form or electronic form or digital form or print-outs of data stored in electronic form or in digital form or any other form of electromagnetic data storage device. Place of maintaining books of accounts and other documents: Shall be kept and maintained at its "registered office". If the accounts are maintained other than the registered office or at various project locations, intimate Assessing Officer in writing, giving full address of the other places supported by resolution of the board. Period for which books of accounts & other documents should be kept: Kept and maintained for a period of ten years from the end of the relevant assessment year.

Organisation having income subject to section 11(4) and 11(4)(A) to maintain separate set of books of account of such income in line with the provision under Income Tax Act.

Implication of Non-Maintenance of Books of Account:

Section 13(10) and (11) inserted wef AY 22-23 stating that income chargeable to tax shall be computed after allowing a deduction for expenditure incurred for the objects of the institution subject to fulfillment of the following conditions, namely:

Such expenditure is not from the corpus standing to the credit of such trust or institution. Such expenditure is not from any loan or borrowing. Claim of depreciation is not in respect of an asset, acquisition of which has been claimed as an application of income. Such expenditure is not in the form of any contribution or donation to any person. Such expenditure violating section 40(3) and 40(a)(ia) disallowed. Expenditure not allowed except under section 11-13.

Income Tax Bill 2025

Provision for Charitable institutions

The Bill introduces the term “Registered Nonprofit Organization” (Registered NPO) to define all charitable entities i.e. society, Trust, S8, Univ etc. Consolidation of Provisions for NPOs into a Single Chapter: Chapter 17B - Special Provisions for Registered NPOs - (Clause 332-355). This chapter is divided into seven structured subparts:

Registration – Application timelines, conditions for approval and validity of registration. Income Computation – Rules regarding taxability and accumulation of income. Commercial Activities – Limitations on NPOs engaging in profit-generating activities. Compliance Requirements – Filing of tax returns, audit requirements and disclosures. Penalties and Violations – Consequences for non-compliance. Deductions for donations under Section 133 (erstwhile 80G) – Regulations governing tax deductions on donations to NPOs. Changes in Taxability and Compliance Requirements: Under the current tax law, provisions related to the taxability of NPOs’ income are spread across multiple sections, such as:

80G Section 115BBC – Taxability of anonymous donations. Section 115BBI – Taxability of certain specified income etc. Section 115TD – Exit Tax etc. The Bill consolidates these provisions under a single framework. Simplified Application of Income Provisions:

The Existing Section 11 provisions regarding the application of income are complex due to multiple explanations and cross-references. The new bill consolidates all application-related provisions in one section, making it easier to determine: What qualifies as an eligible application of income. The conditions required for the application of income to be tax-exempt. Treatment of funds applied from corpus and their replenishment. Elimination of Deemed Application Concept: The new bill removes the deemed application concept for shortfall in 85% application out of income. Enhanced Accumulation Provisions: Bill eliminates restrictions on the purpose of accumulation for five-year accumulation. Nonprofits can now accumulate funds for any objective within their registered mandate. Anonymous donation provision not applicable now only to religious institutions. 15% income set apart is now called Deemed accumulated income and is to be invested in specified modes of investment. Regular income has been defined to include receipts for charitable activity, voluntary contribution, incidental business income. Application from corpus, loans and borrowings, deemed accumulated income etc. not application. Delay in Audit report is not specified non-compliance.

Session II layout

Forms, Returns & Proceedings TDS provisions Other miscellaneous provisions in Income Tax law applicable to NGOs

Income Tax Returns Forms:

In the following sequence to file:

Form 9A/Form 10 (Deemed application/Accumulation - 31 Aug) Form 10B/10BB (Audit Report - 30 Sep) ITR-7 (Income Tax Return - 31 Oct)

Form 9A & Form 10:

Section 11 of the Income Tax Act 1961 provides two options when the threshold of 85% application is not met by a charitable institution:

Section 11(1): Be accumulated for application in the year of receipt/next year.

{Form 9A} Form 9A can be filled in two situations:

For non-receipt of the income. Any other reason (the reason for shortfall needs to be communicated in writing in form). Section 11(2): Accumulated or set apart for specific purpose for a maximum period of 5 years.

{Form No. 10}. Pass Board resolution for the purpose and period of accumulation and deposited in 11(5) investment mode. Both Forms to be filed Online in prescribed application format. Due date as per Finance Act 2023 - 2 months before due date for ITR filing i.e. by 31st August although CBDT circular of May 2023 has relaxed it as on or before due date of ITR filing for FY 2022-23.

Audit Report Form 10B/10BB:

As per IT Rules 2023 change from AY 23-24, Audit Report in 10B:

If the total income exceeds Rs. 5 crore during the previous fiscal year. In case institution receives foreign contribution. In case any institution has used its income outside India in the previous year. Applicable uniformly for 12A and 10(23C) entities. Prior to change 10B was for 12A entity and Form 10BB was for 10(23C) entity. Determine applicability of 10B or 10BB. Very elaborate form specially 10B (49 clauses and 28 schedules) as against simple form earlier. It also casts responsibility on auditor to provide true and correct opinion in the report. Form 10BB has 32 clauses and 5 Schedules. Due date - 30th September.

Income Tax Return (Form-ITR 7):

Charitable institutions u/s 11 have three types of income: AI (Aggregate Income), VC (Voluntary Contribution) and CG (Capital Gains) not as per 5 heads of income. ITR 7 covers all types of charitable institutions - charitable and religious, political parties, scientific research institutions, Univ, colleges. S.139(4A) for 12A entities. 2 parts - Part A - General; Part B - Total income and tax computation. Details of registration or approval under Income Tax Act and other registration (80G and FCRA), Auditor, Board etc. Schedule I/IA: amount set aside/accumulated and taxed. Schedule D/DA - deemed application and taxed. Schedule J: Details of corpus investments and loans/borrowings and Schedule R for reconciliation of corpus with BS. Schedule VC: Voluntary Contribution (grants/donations/corpus). Schedule AI: Aggregate of Income excluding Voluntary Contribution (All incidental income from activities and interest income). Schedule ER: Revenue Expenses and sources to meet ER (Establishment & Objects). Schedule EC: Capital Expenses and sources to meet EC. Total of “Source of Funds” under ER and EC Schedule match with the total expenditure. Schedule TI and TTI - Computation of income and computation of taxes. Details of all bank accounts to be reported. Expenditure incurred outside India, Provisions to be excluded. The Registered Email ID and Phone Number updated on Income Tax Portal should be of organization. Check status and proceedings on Income Tax Portal from time to time.

26AS, Annual Information Statement (AIS) and Taxpayer Information Summary (TIS):

26AS is tax related information associated with a PAN. Form 26AS displays details of property purchases, high-value investments, and TDS/TCS transactions. AIS (June 2020) is consolidated statement of financial transactions and is extension of Form 26AS. AIS additionally includes savings account interest, dividend, rent received, purchase and sale transactions of securities/immovable properties, SFT, foreign remittances, interest on deposits, GST turnover etc. AIS has facility for providing feedback. TIS is derived from AIS and reflects the processed values and derived (accepted) values separately for different income sources - salary, interest, dividend, etc. Processed value is the value generated after deduplication of information based on pre-defined rules. Derived value is the value derived after considering the taxpayer’s feedback and processed value. The derived value is used for pre-filling of ITR.

IT proceedings:

Notice u/s 142(1) - filed return but AO needs more docs/info or return not filed. Intimation u/s 143(1) - assessment of ITR by CPC to determine demand/refund. Notice u/s 143(1A) - Based on ITR filed, intimation for adjustment for mismatch identified during centralized processing in Form 26AS. Notice u/s 143(2) - when there is discrepancy, notice for scrutiny assessment but processing of return u/s 143(1) mandatory. Notice u/s 143(3) - Income Tax Assessment - Scrutiny. Notice under Section 148A - income escaping assessment (3 years from end of AY in case of income up to 50 lakhs and up to 10 years if income more than 50 lakhs). Notice u/s 245 - set off of current year refund against previous demand. Penalty u/s 270(A) for concealment/under reporting of income ranging from 50-200% in addition to tax. Intimation u/s 154 for rectification of mistakes in records by AO.

Objectives of TDS:

Regular Inflow of Revenue for Government Checking of TAX EVASION Widening of TAX Base

Tax deducted at source (TDS) and Tax Collected at source (TCS): TDS deducted from income:

Deducted by payer. Imposed when payment crosses threshold. TDS return - 24Q/26Q.

TCS is collected from sale:

Collected by seller. Collected on specific goods under section 206C. TDS return - 27EQ.

TDS Sections:

Section 192 (Salary) Section 194 C (Contractual Payment) Section 194 J (Fees for Professional & Technical Payment) Section 194 I (Rent)

Income Tax Slab and Tax Rate (General)

On Salary:

Deduct at rate of Income Tax computed on the basis of rates in force. Rates in force for person other than Senior Citizens:

Income Tax Slab FY 25-26:

Rates in force:

Any individual opting to be taxed under the new tax regime from FY. Chapter VI-A deduction (80C, 80D), Interest on housing loan etc. Standard deduction and 80CCD(2) allowed.

Example Tax Calculation:

₹75,000 in new regime and Rs. 50,000 in old regime for salaried. And Rs. 5 lakhs in Old regime.

194 C – Payments to Contractors:

On the invoice value excluding the value of material, if such value is mentioned separately in the invoice. Or, on the whole of the invoice value, if the value of the material is not mentioned separately in the invoice.

TDS Rate:

1% where payment is to an individual / HUF. 2% where recipient is any other person.

Limit:

If the credit or payment in pursuance of the single contract does not exceed Rs. 30,000 in FY, no deduction shall be made at source. However, if the aggregate of all amount paid / credited or likely to be credited exceeds in F.Y. Rs. 1,00,000 then tax at source is to be deducted.

Section 194 C includes:

Advertisement. Broadcasting and telecasting including production of programmes for such broadcasting and telecasting. Catering. Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. Engagement of manpower on contract. Carriage of goods or passengers by any mode of transport other than by railways, - NO TDS if PAN is provided and vehicles up to 10.

194 J – TDS on Fees for Professional or Technical Services:

Threshold Exemption Limit: In Finance Act, increased to Rs. 50,000 in a FY.

Professional & Technical services:

“Professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession notified by the Board for the purposes of section 44AA or of this section. “Fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial (running or management of business), technical (technical expertise) or consultancy (advisory) services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or which would be income chargeable under the head “Salaries”.

194 I – Rent:

In Finance Act 2025, increased to Rs. 6 lakh in aggregate and not more than Rs. 50k per month.

Section 165:

Payment made to non-resident Indian is taxable for applicable income like fee for technical services, royalty, dividend etc subject to checking DTAA with that country. No threshold. Section defines Indian resident - stay in India for min 182 day in a FY or min 60 days in a FY and min 365 days in past 4 Fys. If not, Section 185 applies. Declaration on information of 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 on DTAA) with Department and provided to bank for remittance. Report in TDS return Form 27Q.

TDS - Points to remember:

In case of salary, TDS is on estimated Income until formalized in final month of FY. Section 206 AA: Deductee furnish PAN number to the deductor and mention in correspondence, bills, vouchers and otherconstitution documents. TDS deducted at 20% if PAN is not provided by deductee. Inoperative PAN:

PAN Aadhaar linkage mandatory for assesses to avail services. Post 1.6.2024, if PAN Aadhaar linking is not done, PAN will be inoperative. Rate as provided in 206AA - 20%.

Monthly Deposit of TDS:

In case of TDS Deducted for Q4 – to be deposited by 30th April.

TAN – Tax Deduction & Collection Account Number:

Source has to apply for TAN in FORM NO 49B within one month from the end of the month in which tax is deducted for the first time.

Interest on late deduction/deposit of TDS:

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.

Issue of Form 16/16A - TDS certificate:

Deductors shall issue TDS certificate in Form No 16 / 16A generated through TIN central system and downloaded from TRACES with a unique TDS certificate number in respect of sums deducted under provision of Chapter XVII-B.

Filling of Quarterly TDS Return:

Penalty in respect of Non-filing or incorrect filing of quarterly TDS return:

Rs. 200 Per day till the time failure continues or total amount of TDS deducted during the quarter (Whichever is less). Section 271H: Penalty for Incorrect information or failure to furnish quarterly return etc. Penalty u/s 271H: The penalty shall be a minimum of Rs. 10,000/- and it can be extended up to Rs. 1,00,000/-. This penalty is mandatory in nature and cannot be waived.

Section 269ST: Receipt of cash donation:

Finance Act 2017 restricts person receiving Rs. 2 lakh or more in cash from a person in aggregate in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person. The contravention of such provision shall attract penalty under section 271DA i.e. equivalent to the amount so received by the recipient. In case of receipt of cash donations by a trust (may be charitable or religious) in contravention of section 269ST, then relevant trust shall attract penal consequences.

Section 206AB of IT Act wef 1.7.2021:

Deleted by Finance Act 2025. TDS rate if the amount is paid/credited to a specified person, being higher of the below rates:

At twice the rate specified in the relevant provision of the Act; or Twice the rate/rates in force; or At the rate of 5%. Specified Person is one who has not filed the Income Tax Return (ITR) for preceding year immediately before the previous year in which tax is required to be deducted and the aggregate TDS/TCS is Rs. 50,000 or more in each of the previous year. The time limit of ITR filing under sub-section (1) of Section 139 is expired for calculating non-filing for previous year. Not applicable for certain sections - mainly Section 192 and others. Compliance check functionality created by Department through Reporting Portal.

194 Q - TDS on purchase of goods wef 1st July 2021:

Section 206C(1) - TCS on NTFP items:

Seller collects from buyer tax on purchase value of specified goods:

Tendu leaves - 5%. Timber under or other than lease: 2.5%. Any other forest produce other than a and b: 2.5%. TCS u/s 206C(1) shall not be required to be collected from a resident buyer, if the goods are to be utilized for the purpose of manufacturing, processing or producing articles or for generation of power and not for trading purposes.

Section 194R - TDS on perquisites/benefits made to service provider:

A person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @ 10% of the value or aggregate of value of such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business or profession, by such resident. If the perquisite/benefit is estimated to be less than Rs. 20k in a FY, no TDS is to be deducted.

Please note:

If the Invoice of expenses incurred is in the name of ultimate service recipient – No TDS u/s 194R. If the Invoice of expenses incurred is in the name of Service Provider – TDS to be deducted u/s 194R. Effective from 1st July 2022.

Lower Tax deduction Certificate (LTDC):

(1) Where income-tax is required to be deducted at time of credit or payment under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA and 195, 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 this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.