Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
>
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
+ Post an Article
Post a New Article
Title :
0/200 char
Description :
Max 0 char
Category :
Co Author :

In case of Co-Author, You may provide Username as per TMI records

Delete Reply

Are you sure you want to delete your reply beginning with '' ?

Delete Issue

Are you sure you want to delete your Issue titled: '' ?

Articles

Back

All Articles

Advanced Search
Reset Filters
Search By:
Search by Text :
Press 'Enter' to add multiple search terms
Select Date:
FromTo
Category :
Sort By:
Relevance Date

A Comparative Overview: Taxation and Registration of NPOs under the Income Tax Act, 1961 vs. Income Tax Bill, 2025

MOHIT GUPTA
Income Tax Bill 2025 consolidates non-profit rules under unified 'Registered NPOs' framework with stricter compliance requirements The Income Tax Bill, 2025 significantly restructures taxation and registration of non-profit organizations compared to the current Income Tax Act, 1961. The new legislation reduces provisions from 12,800 to 7,600 words, introducing the uniform term 'Registered NPOs' to replace varied terminologies used previously. All NPO-related provisions are consolidated under Chapter XVII-B, eliminating fragmentation across five chapters. Key changes include explicit prohibition of commercial activities except those incidental to objectives, removal of capital gains reinvestment options with retention of the 85% application rule, and introduction of concepts like Regular Income and Taxable Regular Income. The Bill maintains continuity for existing registrations while offering fresh registration opportunities for entities that missed the 2021 deadline. Enhanced compliance requirements include detailed audit norms and consolidated violation taxation under Section 332. The reform emphasizes greater legal clarity, administrative efficiency, and standardization while imposing stricter accountability measures on charitable organizations. (AI Summary)

Introduction: A Move Towards Simplification

The current Income Tax Act, 1961 devotes approximately 12,800 words to the provisions governing NPOs. In contrast, the Income Tax Bill, 2025 reduces this to 7,600 words, emphasizing clarity and precision. This reduction is not merely cosmetic—it reflects a deeper reorganization of the law, replacing scattered legalese and multiple provisos with structured tables, defined timelines, and concise definitions.

Definition and Scope of NPOs – Introduction of a Uniform Term

One of the most notable changes is the standardization of terminology. Under the 1961 Act, different sections used varied expressions—such as “educational institutions existing solely for educational purposes” [Sec 10(23C)], “trusts,” “hospitals,” or “societies.” The 2025 Bill introduces a uniform umbrella term: “Registered NPOs”, which includes trusts, societies under the Societies Registration Act, 1860, Section 8 companies, religious institutions like temples and mosques, and others.

Structural Consolidation – Provisions under a Single Chapter

Provisions related to NPOs in the current Act are fragmented across five chapters. The Income Tax Bill, 2025 consolidates all these provisions under Chapter XVII-B, divided into seven sub-parts, covering registration, compliance, audit, taxability in case of contravention, and more.

Continuity of Existing Registrations

Entities already registered under the existing Act will not be required to re-register, provided their registration is valid and has not been cancelled.

New Compliance Expectations and Tax Implications

The Bill introduces concepts like Regular Income and Taxable Regular Income, and consolidates rules regarding anonymous donations, misapplied funds, and other violations under Section 332.

Restriction on Commercial Activity

The 2025 Bill explicitly prohibits NPOs from engaging in commercial activities except those incidentals to their objectives, unlike the current Act which does not state this clearly.

Capital Gains and Investment

The Bill removes the reinvestment route for capital gains, factoring them into the 85% application rule.

Transition Mechanism

Entities that missed registering under the new regime since 2021 are offered a new opportunity to register.

Comparative Snapshot: Income Tax Act, 1961 vs. Income Tax Bill, 2025

S. No.

Basis

Income Tax Act, 1961

Income Tax Bill, 2025

1

Term Expression

Uses varied terms (trust, society, etc.)

Standard term: 'Registered NPO'

2

Definition

No specific definition of eligible persons

Section 332 defines eligible applicants

3

Structure

Scattered across 5 chapters

Consolidated into Chapter XVII-B

4

Capital Gains

Exempt if reinvested or 85% applied

Reinvestment option removed; 85% rule prevails

5

Commercial Activities

No explicit restriction

Specifically prohibited except if incidental

6

Transition Window

No fresh opportunity

Fresh window to register if missed in 2021

7

Tax Exemption

Blanket exemption for many entities

Exemption linked to registration with conditions

8

Taxation of Violations

Under Sections 13, 115BBC, etc.

Consolidated under Section 332

9

Return Filing Delay

Leads to taxation of net income

Covered under new 'Specified Income' clause

10

Audit/Compliance

Scattered requirements

Detailed norms within Chapter XVII-B

Conclusion

The Income Tax Bill, 2025 represents a paradigm shift in how non-profit entities are taxed and regulated in India. It brings greater legal clarity, administrative efficiency, and standardization, while also imposing stricter compliance obligations. Although it offers flexibility and continuity for already registered institutions, the regime demands a more accountable, transparent, and formalized operation of charitable organisations going forward. NPOs would do well to revisit their structures, operations, and compliance mechanisms in light of this significant legislative reform.

answers
Sort by
+ Add A New Reply
Hide
+ Add A New Reply
Hide
Recent Articles