NGO update

[CA Raj Chawla]

Respected Members,

 
Quotes of the day;

 

1.    Do not sell your soul in exchange of anything, this is the only thing you have brought into this world and the only thing you can take back.

 

2.    Your mind is a Magnet, If you think of Blessings; You'll attract Blessings. If you think of Problems; You'll attract Problems. Always cultivate good thoughts and always remain Positive & Optimistic.

 

NGO update;

 

1.    The Income Tax Act, 2025 replaces the 1961 Act from 1 April 2026 and overhauls taxation of NGOs, Trusts, and Section 8 Companies. The biggest shift: all charitable and religious entities are now under a single framework called “Registered Non-Profit Organisations” or RNPOs. 

 

2.     New RNPO Concept:

 

a.     Chapter XVII Part-B of the 2025 Act is a dedicated section titled “Special Provisions for Registered Non-Profit Organisations”.

 

b.    “Charitable purpose” is defined u/s 2(23) to include: relief of the poor, education, yoga, medical relief, preservation of environment, monuments/objects of artistic/historic interest, and advancement of any other object of general public utility.

 

c.     Only entities constituted in India for wholly charitable/religious purposes with assets held for public benefit under irrevocable trust qualify. Permitted forms: Public Trusts, Registered Societies, Section 8 Companies, govt-funded institutions, etc. 

 

3.     Old vs New Section Mapping:

 

a.     Registration: Erstwhile Sections 12A/12AA/12AB are now covered u/s 332 as RNPO registration.

b.    Income & Taxation: Sec 11-13 regime replaced by Sec 334-337. Income is now split into 3 types:

 

c.     Regular Income – Sec 335: Exempt if 85% applied/accumulated for charitable purposes. Includes activity income, property income, voluntary contributions, and incidental business.

 

d.    Specified Income – Sec 337: Taxed at 30%. Includes anonymous donations, benefits to related persons, income applied outside India, investments violating Sec 350, misapplied accumulations.

 

e.     Residual Income – Sec 355(J): Taxed at normal slab rates. Covers income not fitting other categories, like activities outside objects or prior period income.

 

f.      Donor Approval: Separate 80G approval merged into the RNPO framework. No standalone 80G now. 

 

4.    Key Reliefs and Compliance Changes:

 

a.     Automatic Transition: Existing registrations under 12A, 12AA, 12AB, 10(23C) are valid and deemed RNPOs. No fresh registration needed immediately. Validity continues for the balance period.

 

b.    Single Regime: Dual regimes of 10(23C) and 11-13 ended. New applications under 10(23C) stopped after 1 Oct 2024. On expiry, entities must register under the second regime.

 

c.     Application Rules: 85% of donation to other RNPO counts as application. Corpus reinvestment, loan repayment within 5 years allowed as application.

 

d.    Deemed Application: Shortfall below 85% can be treated as deemed application if applied in current or next tax year. Due date was relaxed to the ITR filing date, not 2 months before.

 

e.     Simplification: All NPO provisions consolidated into one chapter to reduce complexity for smaller organisations. 

 

5.    Updated Forms Under 2025 Act:

 

a)    Income-tax Rules, 2026 and new simplified Forms notified on 20 March 2026.

b)    ITR-7 updated for AY 2025-26 for trusts/NGOs with rationalised capital gains reporting. 

 

6.    Important for NGOs, Trusts, Section 8 Companies:

 

a)     You don’t need to re-register now if you hold valid 12A/12AB/10(23C) approval.

b)    Track income buckets: misclassifying as “specified income” triggers 30% tax.

c)     Ensure 80G donor compliance is met within RNPO registration; the separate 80G approval process is gone.

d)    Use new ITR-7 and updated forms from 1 April 2026.

 

7.      Follow the CA Raj Chawla NICAI Update Channel on WhatsApp to get the latest ICAI news, announcements, professional updates, and important notifications instantly Link :https://whatsapp.com/channel/0029Vb6q4i8LNSZwQ3bbxY2j

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With best regards

CA (Dr) Raj Chawla

B.Com (Hons), FCA, FCS, FCMA, LLB 

MIMA, DISA, MICA, Phd, ASA (Aust), CMP (USA)

712, New Delhi House

27,Barakhamba Road, New Delhi-110001

Ph. Off. 011-43581083

Cell: 98110-81083

rajch...@gmail.com