Section 335 Regular income.

Income-tax Act, 2025

At a Glance

Section 335 as appearing in the Income-tax Act, 2025 (Document 1), and Clause 335 of the Income Tax Bill, 2025 - Old Version (Document 2). Both define "regular income" of a registered non-profit organisation, but they differ in wording, structure and certain substantive inclusions/exclusions. The changes affect how receipts/income from charitable activities, property/investments, voluntary contributions and commercial activity gains are characterised for tax purposes and therefore affect taxpayers (registered non-profit organisations), the tax department, and advisors. Effective date or enactment status: Not stated in the document.

Background & Scope

Statutory hooks: Clause/Section 335 (as labelled) dealing with "Regular income" of a registered non-profit organisation. The Bill text (Document 2) provides the definition in the Bill's old version; Document 1 presents a Section 335 in the enacted Act form. Both texts concern the coverage of income/receipts that constitute the regular income of a registered non-profit organisation. Definitions beyond the clause text (e.g., definition of "registered non-profit organisation", "charitable or religious activity", or "commercial activity") are Not stated in the document. Any cross-references to other provisions: Document 2 refers to sections 345 and 346 (as restrictions); Document 1 refers to sections 344, 345 and 346 and to section 332(2)(b)(ii) for part-held property. No further definitions or explanatory notes are provided in the materials supplied.

Statutory Provision Mode

Text & Scope

Clause 335 (Old Bill version) defines "regular income of any tax year of a registered non-profit organisation" to include four categories: (a) receipts from the charitable or religious activity for which the organisation is registered and carried out in that tax year; (b) receipts (other than those in clause (d)), whether capital or revenue, derived from any property or investment held by the organisation in that tax year; (c) voluntary contributions received in that tax year; and (d) gains of any commercial activity, other than commercial activities restricted u/ss 345 and 346, carried out in that tax year, computed in such manner as prescribed. The clause is a definitional provision setting out the heads of regular income; further detail on computation is delegated to rules/regulations ("as prescribed").

Interpretation

The text frames "regular income" as encompassing both operational charitable/religious receipts and returns from assets/investments, contributions, and certain commercial gains. The Bill expressly treats receipts from property/investment as possibly capital or revenue in nature, indicating an intent to capture both types. The exclusion clause for commercial activities (i.e., activities restricted u/ss 345 and 346) shows a legislative design to permit some commercial activities while excluding others: the boundary is to be found in those cross-referenced sections. Legislative intent beyond the text (policy rationale, taxpayer burden relief, or revenue objectives) is Not stated in the document.

Exceptions/Provisos

The sole express exception in the Bill text is that receipts described in clause (b) exclude those specified in clause (d), i.e., receipts that are gains of commercial activity (clause (d)). Additionally, clause (d) itself excludes commercial activities that are restricted by sections 345 and 346. No other provisos, thresholds or carve-outs are provided in this clause. Any monetary thresholds, detailed exclusions, or special computation rules are Not stated in the document beyond the general "computed in such manner, as prescribed" for commercial gains.

Illustrations

• Example 1: A registered non-profit running an educational programme receives fees for that programme in the tax year. Under clause (a) such fees are receipts from the charitable activity for which it is registered and therefore form part of regular income.
• Example 2: A registered non-profit owns an office building from which it gets rental income. Those receipts, whether regarded as capital or revenue, fall under clause (b) (unless they are gains of a commercial activity excluded by clause (d)).
• Example 3: The organisation undertakes a commercial venture whose gains are permitted (i.e., not restricted u/ss 345 and 346). Those gains are regular income under clause (d) and are subject to prescribed computation. Specific computation method: Not stated in the document.

Interplay

Clause 335 interacts by reference with sections 345 and 346 (restricting certain commercial activities). The clause contemplates prescribed computation for commercial gains, indicating interplay with subordinate legislation. Any interaction with other statutory provisions (for example, sections concerning registration, exemptions, or the treatment of voluntary contributions) is Not stated in the document except as noted.

Differences Between the Section 335 as appearing in the Income-tax Act, 2025 (Document 1), and Clause 335 of the Income Tax Bill, 2025 - Old Version (Document 2)

Principal textual and structural differences (comparison based strictly on the two supplied texts):

• Terminology: Document 2 (Bill) uses "receipts"; Document 1 (Act) uses "income".
  • Practical impact: "Income" is a broader accounting/tax term than "receipts" and may incorporate notional gains or accruals, whereas "receipts" could be read more narrowly as cash or tangible receipts. The change may expand the taxable base or affect timing/recognition, depending on interpretation; the Bill does not itself explain the intended scope: Not stated in the document.
• Property/Investment language: Document 2's clause (b) speaks of "receipts, other than those specified in clause (d), whether capital or revenue, derived from any property or investment held by such registered non-profit organisation". Document 1 separates wholly held property/deposit/investment (clause (b)) and part-held property/deposit/investment (clause (c)) and introduces express exclusion "other than income covered in clause (e)". It also introduces the term "deposit" and refers to section 332(2)(b)(ii) for part-held assets.
  • Practical impact: The Act's text is more granular-distinguishing wholly vs part-held assets and explicitly excluding commercial gains (clause (e)) from these heads-thus offering greater precision as to what counts as regular income from investments. This could reduce ambiguity about mixed-use assets and allocation of returns between charitable and non-charitable purposes.
• Voluntary contributions: In Document 2 voluntary contributions are clause (c); in Document 1 they are clause (d). Substantive text is largely similar.
  • Practical impact: Purely structural; no substantive difference except placement.
• Commercial activity gains: Document 2's clause (d) includes "gains of any commercial activity, other than the commercial activities restricted u/ss 345 and 346". Document 1's clause (e) refers to "gains of any commercial activity permissible u/ss 344, 345 and 346" (and is to be "computed in such manner, as may be prescribed").
  • Practical impact: The Act expands cross-references (adds section 344) and shifts the framing from "other than restricted under 345 and 346" to "permissible under 344, 345 and 346". This could change the scope of permissible commercial activities and the point of reference for restriction/permissibility. Exact practical consequences require reading sections 344-346: Not stated in the document.
• Capital/revenue qualification: Document 2 explicitly states "whether capital or revenue" for property/investment receipts; Document 1 omits that language.
  • Practical impact: Removal of the explicit "capital or revenue" qualification may create interpretive questions about capital receipts from property/investments; whether such receipts are regular income will rest on interpretation of "income" and other provisions: Not stated in the document.

Practical Implications

• Compliance and risk areas: Registered non-profit organisations must identify and classify receipts into the four heads. Particular areas of risk include (a) distinguishing charitable activity receipts from commercial activity gains, (b) classifying receipts from property/investments as capital or revenue, and (c) determining whether a commercial activity is "restricted" u/ss 345 and 346. The Bill requires prescribed computation for commercial gains; lack of published rules may create uncertainty until such rules are issued: Not stated in the document.
• Record-keeping/evidence: The text implies the need for clear records segregating receipts from charitable operations, voluntary contributions, investment returns (with evidence to support capital vs revenue nature) and accounts for commercial activities (supporting computation as prescribed). The exact form of records or prescribed documentation: Not stated in the document.

Key Takeaways

• Clause 335 (Old Bill) defines regular income in four heads: charitable activity receipts; receipts from property/investment (capital or revenue); voluntary contributions; and gains from permitted commercial activities (subject to prescribed computation).
• Difference in later Act text: the Act uses "income" (not "receipts"), distinguishes wholly vs part-held assets, adds "deposit", and references sections 344-346 and section 332(2)(b)(ii); these are substantive drafting changes with practical effects on classification and scope.
• The Bill expressly captures both capital and revenue receipts from property/investments; the Act omits that express wording, potentially altering interpretive emphasis.
• Commercial gains are included but limited by cross-references to other sections; precise scope depends on those sections and on prescribed computation rules, which are not in the clause itself.
• Many operational details-computation methods, registration implications, and the boundary between charitable and commercial activities-are left to other provisions or subordinate rules and are Not stated in the document.

Full Text:

Section 335 Regular income.