Charitable trusts, religious institutions, educational bodies, and NGOs have long enjoyed income tax exemptions in India. Under the old Income Tax Act, 1961, these provisions were scattered across Sections 11, 12, 12A, 12AA, 12AB, 13, 10(23C), 80G, 115BBC, and several others — creating a labyrinth of cross-references that even experienced tax professionals found challenging.
The Income Tax Act, 2025, effective from 1 April 2026, brings a radical simplification. All provisions for charitable and religious entities are now consolidated into a single Chapter XVII-B, spanning Sections 332 to 355. These entities are collectively termed “Registered Non-Profit Organisations” (RNPO) — replacing the confusing array of “charitable trusts,” “institutions,” “funds,” and “other legal obligations” scattered across the old Act.
This guide covers the complete registration framework under Section 332, the transition for existing entities, the 85% application rule, compliance requirements, violations that can lead to cancellation, and the 80G approval for donors.
What Is a Registered Non-Profit Organisation (RNPO)?
Under Section 355(g) of IT Act 2025, a Registered Non-Profit Organisation (RNPO) is any person having a valid registration under any “specified provision” and whose registration has not been cancelled. The “specified provisions” include Sections 12A, 12AA, 12AB, or Section 10(23C) of the old Act, and Section 332 of the new Act.
This unified terminology replaces the multiple labels used earlier — charitable trusts, religious institutions, educational institutions, hospitals, etc. — into a single concept, making compliance and interpretation far simpler.
Who Can Apply for RNPO Registration?
Section 332(1) of IT Act 2025 specifies the following entities eligible to apply:
- A trust created under an instrument or otherwise
- A society registered under the Societies Registration Act, 1860, or any state law
- A company registered under Section 8 of the Companies Act, 2013 (or Section 25 of the Companies Act, 1956)
- A University established by law, or any educational institution affiliated to or recognised by the Government
- An institution financed wholly or in part by the Government or a local authority
- Any other fund or institution established for charitable or religious purposes
If you are setting up a new charitable trust, society, or Section 8 company, the first step is entity formation under the relevant Act, followed by application for RNPO registration under Section 332. Our team assists with , , and across India.
Registration Types, Timelines & Validity Under Section 332
Section 332(3) of IT Act 2025 introduces a clear tabular format (a significant improvement over the old Act’s complex cross-references) for registration timelines:
| Scenario | Form | Application Deadline | Order Deadline | Validity |
|---|---|---|---|---|
| New entity — Provisional registration | Form 10A | At least 1 month before commencement of the tax year | Within 1 month of receipt | 3 years from AY of grant |
| Conversion of provisional to regular registration | Form 10AB | At least 6 months before expiry of provisional registration OR earlier of specified date | Within 3 months of receipt | 5 years (or 10 years for small trusts*) |
| Renewal of regular registration (after 5/10 years) | Form 10AB | At least 6 months before expiry of current registration | Within 3 months of receipt | 5 years (or 10 years for small trusts*) |
| Existing 12A/12AA/12AB entity — Re-registration under new Act | Form 10AB | At least 6 months before expiry of existing registration | Within 3 months of receipt | 5 years (or 10 years for small trusts*) |
| Registration became inoperative (Section 333 regime switch) | Form 10A | Any time during the tax year from which registration is to become operative | Within 1 month of receipt | Remaining validity of original registration |
| Modification or change of objects | Form 10AB | Within 30 days of adopting or modifying objects | Within 3 months of receipt | 5 years (or 10 years for small trusts*) |
*10-Year Extended Validity for Small Trusts: Where the total income of the applicant (computed before giving effect to exemptions) does not exceed Rs 5 crore in each of the two preceding tax years, the registration is valid for 10 years instead of 5 years. This benefit was introduced by the Finance Act 2025 and applies to applications made after 31 March 2025. It does NOT apply to provisional registration of new entities.
Provisional Registration — For New Entities
When a new charitable trust, society, or Section 8 company is formed and wants to claim income tax exemption from its very first year:
- Apply in Form 10A at least 1 month before the commencement of the tax year from which exemption is sought.
- The Principal Commissioner or Commissioner must pass an order within 1 month of receipt.
- Provisional registration is granted for 3 years from the assessment year of grant.
- During these 3 years, the entity operates with provisional registration without a detailed inquiry into activities.
- Before expiry, the entity must apply in Form 10AB for conversion to regular registration.
Important: A new NGO will NOT be entitled to exemption in the very first year of operation if it fails to apply for provisional registration at least 1 month prior to the commencement of that year. Timely application is critical.
Transition for Existing Registered Entities
This is perhaps the most critical point for existing charitable trusts and institutions. Under Section 355 of IT Act 2025:
- Existing registrations granted under Sections 12A, 12AA, 12AB, or 10(23C) of the old Act continue to remain valid until their expiry date.
- There is NO requirement to apply afresh under Section 332 until the existing registration expires.
- From 1 April 2026, all existing registered entities are automatically treated as RNPOs under the new Act.
- When the existing registration expires, the entity must apply for renewal under Section 332 using Form 10AB, at least 6 months before expiry.
- The renewal will be granted for 5 years (or 10 years for eligible small trusts).
Example: A charitable trust received 12AB registration in April 2023, valid until March 2028. From 1 April 2026, it will be automatically treated as an RNPO. It need not re-apply until September 2027 (6 months before March 2028 expiry). The renewal application will be under Section 332 in Form 10AB.
The 85% Application Rule
The cornerstone of tax exemption for charitable entities remains the 85% application rule:
- An RNPO must apply at least 85% of its regular income for charitable or religious purposes during the tax year.
- If 85% is applied, the taxable regular income is NIL and there is no tax liability.
- If less than 85% is applied and the balance is not accumulated as per prescribed rules (Section 335), the shortfall becomes taxable regular income.
- Accumulation beyond the tax year is allowed for up to 5 years, subject to filing Form 10 and investing in prescribed modes (government securities, FDs in scheduled banks, etc.).
- Corpus donations (donations with a specific direction to be added to corpus) are not treated as application of income.
The 15% retention: The remaining 15% that the RNPO is allowed to retain is exempt from tax. This provides a cushion for capital accumulation and operational reserves.
Section 80G / Section 354 — Approval for Donors’ Tax Deduction
While RNPO registration (Section 332) exempts the trust’s income from tax, Section 80G approval (now Section 354 under the new Act) enables donors to claim tax deductions on their donations:
What it does: Donors contributing to an 80G-approved entity can claim a deduction of 50% or 100% of the donation (depending on the category) while computing their taxable income.
Who needs it: Any RNPO that wants to attract donations by offering tax benefits to donors.
Separate application: 80G approval is separate from RNPO registration. An entity must obtain both — Section 332 registration (for entity’s own exemption) AND Section 354 approval (for donor deduction).
Validity: 80G approval must be renewed every 5 years (the 10-year extended validity for small trusts does NOT apply to 80G approval).
Key change: Under Section 355(f) of IT Act 2025, “registration” does NOT include approval under Section 80G(5) of old Act or Section 354 of new Act. This means 80G approval has its own independent lifecycle.
Our team handles both and 80G approval applications for trusts and NGOs. The two applications can be filed simultaneously for new entities.
Structure of Chapter XVII-B — The Complete RNPO Code
The new Act organises all RNPO provisions into 7 clear sub-parts:
| Sub-Part | Topic | Sections | Key Content |
|---|---|---|---|
| 1 | Registration | Section 332 | Application, timelines, provisional/regular, renewal, 5/10-year validity |
| 2 | Switching Regimes | Section 333 | Movement between old 10(23C) and 12AB regimes; registration ceases/revives |
| 3 | Income & Taxation | Sections 334–338 | 85% application rule, taxable regular income, specified income, anonymous donations (Section 336) |
| 4 | Accumulation | Section 335 | 5-year accumulation, Form 10, prescribed investment modes, deemed income if not applied |
| 5 | Commercial Activities | Section 346 | Limits on business income for “advancement of general public utility” objects: 20% of total receipts OR Rs 25 lakh, whichever higher |
| 6 | Compliance | Sections 347–349 | Books of account, audit, return of income (due 31 October) |
| 7 | Violations & Cancellation | Sections 350–353 | Specified violations, cancellation of registration, tax on accreted income, penalties |
Additionally: Section 354 covers 80G approval for donations. Section 355 contains definitions (RNPO, related person, substantial interest, specified provision, etc.).
Specified Violations That Can Lead to Cancellation
Section 351 of IT Act 2025 defines “specified violations” that can trigger cancellation of RNPO registration:
- (a) Activities not genuine: The activities of the RNPO are not genuine or not being carried out in accordance with its objects.
- (b) Income not applied for objects: The income of the RNPO is not being applied for the objects for which it was established.
- (c) Benefit to related persons: The RNPO’s income or assets are used for the benefit of specified “related persons” (founders, trustees, their relatives, entities where they have substantial interest).
- (d) Commercial activity violation: The RNPO violates the commercial activity limits under Section 346 (exceeding 20% / Rs 25 lakh threshold for business income).
- (e) Investment violation: Funds are invested or deposited in modes not prescribed by the Act.
- (f) Non-compliance with Section 332(7): Failure to comply with conditions attached to registration, confirmed by an undisputed or final order.
- (g) False information in application: The registration application contained false or incorrect information.
When the Principal Commissioner or Commissioner notices a violation (directly, via AO reference, or through CBDT’s risk management strategy), they can call for documents, conduct inquiry, and either cancel or retain registration after providing a reasonable opportunity of being heard.
Compliance Requirements for RNPOs
Books of Account (Section 347): Mandatory if total income (before exemptions) exceeds the basic exemption limit. Must be maintained in prescribed manner.
Audit (Section 348): Books must be audited by a Chartered Accountant. Audit report furnished in prescribed form before the due date.
Return of Income (Section 349): Mandatory filing before 31 October of the assessment year, regardless of whether income is taxable. Form ITR-7.
Donation Statement: RNPOs must file statement of donations received to enable donors to claim 80G deduction. This is filed online.
Cash Donation Limit: Cash donations accepted by the RNPO cannot exceed Rs 2,000 per person. Amounts above Rs 2,000 must be received by cheque or electronic transfer.
Failure to comply with these requirements triggers taxation under Section 353: If an RNPO fails to maintain books, get audit done, or file return of income, its regular income (as reduced by allowable expenditure) becomes taxable. Additionally, specified income and residual income also become taxable under Section 334. This is a significant penalty for non-compliance — the entity effectively loses its entire tax exemption for that year.
Allowable Expenditure Rules Under Section 353(3)
When an RNPO’s income becomes taxable due to violations, the allowable deductions are strictly limited:
- Capital expenditure is NOT allowed as a deduction.
- Expenditure must be incurred in India only.
- Expenditure must be for the objects of the RNPO.
- Expenditure from corpus funds (as of end of prior tax year) is NOT allowed.
- Expenditure financed by loans or borrowings is NOT allowed.
- Depreciation is NOT allowed on assets whose acquisition was treated as application of income.
- Donations or contributions made to other entities are NOT allowed.
Old Act to New Act — Section Mapping
| Provision | Old Act (1961) | New Act (2025) |
|---|---|---|
| Registration of charitable trusts/institutions | Sections 12A, 12AA, 12AB | Section 332 |
| Exemption for charitable/religious trusts | Section 11 | Sections 334–338 (Chapter XVII-B) |
| Income from voluntary contributions | Section 12 | Within Sections 334–338 |
| Denial of exemption / prohibited transactions | Section 13 | Sections 350–353 (violations) |
| Specified institutions (universities, hospitals) | Section 10(23C) | Section 332 (unified RNPO registration) |
| Anonymous donations taxation | Section 115BBC | Section 336 |
| Tax on accreted income (exit tax) | Sections 115TD, 115TE, 115TF | Section 338 (accreted income) + Section 352 |
| Donor deduction on donations | Section 80G | Section 354 |
| Definition of charitable purpose | Section 2(15) | Within Section 355 / Chapter XVII-B |
| Books of account / Audit / Return | Section 12A(1)(ba), 139(4A) | Sections 347, 348, 349 |
| Cancellation of registration | Section 12AB(4) | Section 351 |
| Definitions (RNPO, related person, etc.) | Various scattered provisions | Section 355 |
Common Mistakes to Avoid
Mistake 1: Confusing entity registration with income tax registration. Registering a trust under the Indian Trusts Act or a society under the Societies Registration Act is entity formation. You STILL need separate RNPO registration under Section 332 to claim tax exemption.
Mistake 2: Missing the 6-month renewal deadline. Applications for renewal must be filed at least 6 months before expiry. Late applications may result in loss of exemption and tax on accreted income under Section 352.
Mistake 3: Not filing ITR despite NIL income tax. RNPOs must file ITR-7 by 31 October even if their income is fully exempt. Non-filing is a compliance violation under Section 349.
Mistake 4: Accepting cash donations above Rs 2,000. Cash donations exceeding Rs 2,000 from a single donor are not recognized. Use cheque or electronic transfer for larger amounts.
Mistake 5: Using income for benefit of founders/trustees. Any benefit to “related persons” (founders, trustees, their relatives, entities with 20%+ interest) is a specified violation that can lead to cancellation.
Mistake 6: Assuming 80G renewal is automatic with Section 332 renewal. 80G approval under Section 354 has a separate renewal cycle (5 years always — no 10-year extension). It must be renewed independently.
Key Takeaways
- All charitable trusts, NGOs, and institutions are now “Registered Non-Profit Organisations” (RNPO) under Chapter XVII-B of IT Act 2025.
- Registration under Section 332 replaces the old Sections 12A, 12AA, 12AB, and 10(23C) framework.
- Provisional registration: 3 years (Form 10A). Regular registration: 5 years or 10 years for small trusts (Form 10AB).
- Existing registrations continue until expiry. No fresh application needed until then.
- 85% of regular income must be applied for charitable/religious purposes. Balance 15% is exempt.
- 80G donor deduction approval (Section 354) is separate from RNPO registration and must be renewed every 5 years.
- Compliance: Books of account + CA audit + ITR-7 by 31 October + donation statement.
- 7 specified violations can lead to cancellation: non-genuine activities, related person benefit, false information, commercial activity excess, and others.
- Section 355 consolidates all definitions (RNPO, related person, substantial interest, specified provision) in one place.
Need Help with Trust or NGO Registration?
Whether you are forming a new charitable trust, converting provisional registration to regular, or renewing an expiring 12AB certificate, our team at Patron Accounting handles the entire process — from entity formation to RNPO registration to 80G approval. We also manage annual compliance including , , , audit, and for all charitable entities.
Reach us at +91 945 945 6700 or WhatsApp for expert guidance.
