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    Allocation of shared costs and depreciation: apportionment on reasonable basis and fair proportion affects tonnage tax computations.
    Clause 228(14) requires common costs attributable to the tonnage tax business to be allocated on a reasonable basis, with taxpayers maintaining records to support apportionment. Clause 228(15) requires depreciation for assets other than qualifying ships to be apportioned on a fair proportion determined by the Assessing Officer with reference to actual use. Both provisions mirror Section 115VJ, vesting discretion in the AO and preserving the objective of preventing tax arbitrage while increasing documentation and compliance burdens.
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    Tonnage tax regime: clarifies qualifying shipping income, market value inter company valuation, and related party anti avoidance adjustments.
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    Allocation of tonnage income: proportional or independent computation affects tax treatment of jointly operated qualifying ships.
    Computation of tonnage income for jointly operated qualifying ships follows a two-step approach: where participating companies' shares are definite and ascertainable, income is allocated proportionately to each company; where shares are not definite and ascertainable, tonnage income for each operator is computed as if it were the sole operator. The rule aligns taxation with economic interest, creates documentary and compliance incentives, functions as an anti-avoidance measure, and may interact with cross-border tax rules, requiring clearer guidance on "definite and ascertainable" shares and documentation standards.
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    Tonnage tax regime: ships' taxable income computed by daily tonnage rates and aggregation, excluding deductions.
    Clause 227(1)-(6) prescribes a ship wise tonnage tax: each qualifying ship's tonnage income equals its daily tonnage income multiplied by qualifying days, with daily rates set by a four tier slab linked to certified net tonnage. Tonnage includes certified physical tonnage and prescribed deemed tonnage for slot and sharing arrangements, rounded to the nearest hundred tons. A non obstante clause bars any deductions or set offs, making the computed tonnage income the exclusive tax base under the Part.
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    Tonnage tax scheme: deemed tonnage income treated as business profits, excluding actual shipping income under eligibility conditions.
    Clause 226(7) mandates that tonnage income be computed under a separate formulaic provision and be deemed to be the profits chargeable under business income, while expressly excluding the actual "relevant shipping income" from tax once the tonnage computation applies; these effects are conditional on compliance with the Part's eligibility, option, separation, and record keeping requirements.
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    Tonnage tax scheme: elective presumptive taxation for shipping income, requiring separate accounting and exclusive computation under qualifying criteria.
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    Qualifying ship definition governs tonnage tax eligibility by tying registration, certification, and operational use to tax benefit access.
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    Place of effective management central to qualifying company status, restricting tonnage tax benefits to genuinely India-managed shipping firms.
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    Tonnage tax eligibility defined by operation status: owners and charterers qualify, long term bareboat lessors excluded.
    Clause 226(1) treats a company as operating a ship or inland vessel if it owns or charters a vessel, including partial charters such as slot, space, or joint charters, and excludes companies that have chartered out vessels on bareboat charter or bareboat charter cum demise terms for periods exceeding three years, thereby distinguishing operational risk bearing operators from passive, long term financiers for purposes of the tonnage tax scheme.
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    Tonnage tax regime: option to compute shipping income on a tonnage basis with deeming treatment as business profits.
    Clause 225 creates a self-contained tonnage tax regime for companies operating qualifying ships, allowing an option to compute income under its Part with a deeming provision treating that income as profits and gains of business; key operational questions concern the definition of qualifying ships, the option's exercise and lock-in mechanics, and interaction with loss set-off, allowances, and other tax measures.
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    Tonnage tax definitions: expanded, self-contained eligibility rules broaden coverage and tighten residency and exclusion tests.
    Clause 235 consolidates and expands tonnage tax definitions by explicitly including inland vessels, embedding a detailed qualifying company test requiring Indian residency, ownership of qualifying ships, principal shipping business, and a specified place of effective management; it also defines qualifying ship with tonnage, registration/licensing and certification requirements and enumerated exclusions to prevent abuse.
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    Pass-through taxation of venture capital income taxes investors as if invested directly, with reporting and deemed-credit safeguards.
    Pass-through taxation requires that income arising to investors from venture capital companies or funds be taxed in the investor's hands as if invested directly, with the fund and payer furnishing prescribed statements to investors and tax authorities; undistributed income is deemed credited to investors at year-end in proportion to entitlement, while income already included on an accrual basis is not taxed again on actual payment; specified investment funds are excluded and key terms are defined in the schedule.
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    Tax on accreted income: transferees and officers may be deemed assessees in default, with liability limited to asset value.
    Clause 352(8) deems the specified person (NPO) and its principal officer or trustee to be assessee in default for unpaid tax on accreted income and applies all recovery provisions of the Act; it also deems a transferee of assets in specified dissolution cases to be an assessee in default in respect of such tax. Clause 352(9) limits the transferee's liability to the extent the asset received is capable of meeting the liability, ensuring proportionality in recovery.
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    Accreted income interest compels prompt tax payment and creates joint personal liability for trustees and principal officers.
    Clause 352(7) imposes simple interest for delayed payment of tax on accreted income, with joint and several liability on the specified person and the principal officer or trustee; interest is computed monthly (any part-month treated as a full month) using an explicit formula, and liable persons are deemed assessee in default to enable statutory recovery mechanisms.
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    Exit tax on accreted income expands triggers and fixes final levy after prescribed valuation and procedural safeguards.
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    Pass-through taxation for securitisation trust income preserves investor-level taxation while mandating reporting and deemed-accrual rules.
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      Comparison of section 332 "Application for registration." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

      11 September, 2025

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      Section 332 Application for registration

      Income-tax Act, 2025

      At a Glance

      Clause 332 of the Income Tax Bill, 2025 - (Old Version) "Application for registration" for registered non-profit organisations. It sets out who may apply, eligibility conditions, time-limits and procedural steps for grant, rejection or cancellation of registration. It matters to non-profit entities seeking tax-status benefits and to tax administration (Principal Commissioner/Commissioner). Effective dates or commencement details: Not stated in the document.

      Background & Scope

      Statutory hook: Clause 332, Part B (Special provisions for registered non-profit organisation), I-Registration. The provision prescribes which entities may apply for registration to claim benefits under the Part, the eligibility conditions, procedural timelines for application and decision, and consequences of delay. Definitions for terms used in the Clause (e.g., "charitable purposes" referencing section 2(23)) are limited to reference; the Clause relies on other statutory definitions. Any broader legislative context or explanatory notes: Not stated in the document.

      Statutory Provision Mode

      Text & Scope

      The Clause applies to specified categories of persons who may apply for registration to claim benefits as a "registered non-profit organisation": (a) public trusts; (b) societies registered under the Societies Registration Act, 1860 or any law in India; (c) companies registered u/s 8 of the Companies Act, 2013 or companies previously registered u/s 25 of the 1956 Act and deemed registered u/s 465(2)(g) of the Companies Act, 2013; (d) universities or other educational institutions affiliated or recognised by Government; (e) institutions financed wholly or partly by Government or a local authority; (f) persons listed in specified entries of Schedules III and VII; and (g) other persons notified by the Board.

      Eligibility ingredients (sub-section (2)): (a) constitution/registration/incorporation in India for carrying out one or more charitable purposes as referred to in section 2(23) or one or more public religious purposes, or both; and (b) properties held under an irrevocable trust for the benefit of the general public - either wholly for charitable or religious purposes, or partly for such purposes in India if constituted prior to commencement of the Income-tax Act, 1961.

      Interpretation

      The Clause frames eligibility by reference to existing statutory definitions (section 2(23)) rather than redefining charitable or religious purposes, indicating reliance on established interpretive tests under the Act. The requirement that properties be "held under an irrevocable trust for the benefit of the general public" is a substantive condition: the trust character and public-benefit orientation are explicit statutory prerequisites. The decision-making role is vested in the Principal Commissioner or Commissioner, who must make enquiries and call for documents to assess "genuineness of activities" and compliance with other laws "material for the purpose of achieving its objects." Legislative intent beyond these textually expressed aims: Not stated in the document.

      Exceptions/Provisos

      The Clause contains temporal and conditional permutations in the Table (sub-section (3)) governing when applications must be made, and the period of validity if registration is granted. Notable exceptions/conditions: provisional registration is available where activities have not commenced (Table Sl. No. 1). Sub-section (4) permits condonation of delay by the Principal Commissioner/Commissioner for reasonable cause. Sub-section (5) substitutes a longer validity (ten years instead of five) for certain lower-income applicants (income not exceeding Rs. 5 crore in each of two preceding tax years). Liability for tax on accreted income u/s 352 applies where certain late applications are not condoned (sub-section (6)). Specific provisos limiting scope of object modifications (see Table Sl. No. 7) are not present in the Old Version beyond the requirement to notify within 30 days; further nuance: Not stated in the document.

      Illustrations

      • Newly formed society formed in April seeking registration for tax year starting 1 April: it may apply "at any time during the tax year beginning from which registration is sought"; where activities have not commenced and provisional registration is sought, the Commissioner must decide within three months from end of month of application (Table Sl. No.1).
      • An established trust whose activities have commenced and which has never been registered may apply during the relevant tax year; the Commissioner has six months from end of the quarter in which application is made to pass order; registration, if granted, is valid for five tax years (Table Sl. No.2).
      • A registered non-profit that adopts a modification of objects must notify within 30 days of adoption; the Commissioner may, after enquiring, reject and cancel registration in such cases if not satisfied (Table Sl. No.7; sub-section (7)).

      Interplay

      The Clause expressly references section 2(23) (definition of charitable purposes), u/s 465(2)(g) of the Companies Act, 2013, and section 352 (tax on accreted income) - indicating interplay with substantive definitions and penalty provisions elsewhere. It also refers to "requirements of any other law as are material for the purpose of achieving its objects," signalling cross-compliance checks with other regulatory regimes. Specific cross-references to Rules, Notifications or Circulars beyond "as prescribed" for form and manner: Not stated in the document.

      Practical Implications

      • Compliance and risk areas: Applicants must ensure constitutional documents and asset-holding arrangements evidence an irrevocable trust for public benefit; timely filing is crucial because delays can attract liability u/s 352 if not condoned. Entities altering objects must be alert to the 30-day notification requirement and risk cancellation if changes do not conform to registration conditions.
      • Record-keeping/evidence: The Commissioner is empowered to call for documents and enquiries into genuineness and compliance; applicants should retain foundational documents (trust deed, registration/incorporation records, objects clause, proof of irrevocability of asset holding), evidence of activities, financial statements (income thresholds are relevant for extended validity), and records of communications with funding authorities if government-funded.

      Key Takeaways

      • Clause 332 prescribes categories of entities eligible to seek registration as non-profit organisations and ties benefits to structural and trust-based conditions.
      • Eligibility requires both charitable/religious objective(s) (per section 2(23)) and assets held under an irrevocable trust for public benefit; temporal limitations apply where assets are only partly for such purposes.
      • The statutory Table creates differentiated filing windows, decision timelines and validity periods depending on commencement of activities and prior registration status; provisional registration and renewal mechanics are provided.
      • Condonation of delayed filings is discretionary and taxable consequences (section 352) follow uncured delay for certain categories.
      • The Principal Commissioner/Commissioner has broad fact-finding powers and may reject or cancel registration following a hearing if not satisfied about genuineness or legal compliance.
      • Lower-income applicants (<= Rs. 5 crore in each of two preceding years) may receive extended registration validity (ten years) in specified situations.
      • Form and manner of orders and applications are to be prescribed; specific rules or forms are not contained in the Clause itself.

      Differences between Section 332 of the Income-tax Act, 2025 and Clause 332 of the Income Tax Bill, 2025 - Old Version

      • Sub-section (2)(a): Clause 332 (Old) expressly includes "or both" after charitable and public religious purposes; Section 332 (Act) omits "or both" (it states "for carrying out one or more charitable purposes ... or one or more public religious purposes").
        • Practical impact: potential interpretive clarity in the Bill (Old) that combined charitable and religious purposes qualify; the Act's omission may invite question but likely not change substantive eligibility where both purposes are present-however the omission reduces textual explicitness.
      • Sub-section (3) procedural reference: The Bill (Old) requires following sub-sections (6) and (7); the Act requires following "the procedure provided in this section."
        • Practical impact: the Act's language is broader and may encompass additional subsections (e.g., 4,5) explicitly; the Old Bill's cross-reference is narrower but functionally the procedure invoked appears to align with the same subsections involved in decision-making.
      • Table - Sl. No.1 decision timeline: Clause 332 (Old) sets time-limit for passing order as "Three months from the end of the month in which application is made"; Section 332 (Act) reduces this to "One month from the end of the month in which application is made."
        • Practical impact: the Act imposes a shorter decision timeline for provisional registration where activities have not commenced, increasing administrative speed and pressure on the tax authority; applicants benefit from quicker certainty.
      • Table - Sl. No.7 scope: Clause 332 (Old) applies to an applicant "being a registered non-profit organisation, has adopted or undertaken modification of its objects." The Act narrows this trigger to modifications "which do not conform to the conditions of registration."
        • Practical impact: the Act narrows the category subject to immediate application requirement to object changes that are non-conforming, reducing compliance burden/risk of cancellation for any object modification that remains within registration conditions.
      • Substantive sequencing in sub-section (7): The Old Bill frames the enquiry "as to the compliance of such requirements of any other law ... and the genuineness of activities" while the Act frames enquiries to satisfy about "genuineness of activities, and the compliance of such requirements ... as are material."
        • Practical impact: largely stylistic, but the Act emphasises genuineness first and limits the scope of other-law compliance to requirements material to achieving objects - potentially narrowing the inquiry's scope.
      • Form of orders: Clause 332 (Old) uses "as prescribed"; Section 332 (Act) uses "as may be prescribed."
        • Practical impact: nominal; no substantive change evident.

      Action Points

      • Entities planning to seek registration should verify that their objects fall within section 2(23) and/or public religious purposes, ensure assets are held under an irrevocable trust for public benefit, and prepare documentary evidence in advance.
      • Registered organisations contemplating modification of objects should assess whether changes "conform to the conditions of registration" (per the Act) to determine the 30-day filing obligation and risk of cancellation.
      • Smaller organisations (income <= Rs. 5 crore in each of the two preceding years) should document income history to avail potential ten-year validity in designated cases.
      • Monitor the prescribed forms and order formats when notified, and be prepared for enquiries from the Principal Commissioner/Commissioner.

      Full Text:

      Section 332 Application for registration

      Topics

      ActsIncome Tax