The Finance Bill, 2026 proposes a targeted amendment to the provisions governing violations by registered non-profit organisations (NPOs) to correct an unintended consequence in the law. Under the existing framework of section 351 of the Income-tax Act, 2025, certain commercial activities undertaken by NPOs engaged in the advancement of objects of general public utility were treated as a “specified violation.” Such classification could trigger cancellation of registration, even though similar conduct under the Income-tax Act, 1961 was not intended to attract such a severe consequence. To align the 2025 Act with the earlier law, Clause 68 of the Finance Bill, 2026 removes the reference linking such commercial activity violations to section 351. This ensures that these cases are no longer treated as specified violations warranting cancellation. The amendment also makes a minor textual correction by substituting the word “ensure” with “enure.” These changes will take effect from 1 April 2026 and apply from tax year 2026–27 onwards.
Amendment in the provisions relating to the violations by a registered NPO
Existing provisions of section 351 inter alia specifies activities which constitute ‘specified violation’ by a registered non-profit organisation, and it includes violation on account of commercial activities by registered non-profit organisation carrying out advancement of any other object of general public utility. Such violation is also included in the ‘other violation’ under section 353.
As inclusion of such violation under section 351 as ‘specified violation’ may lead to cancellation of registration, which was not the intent under the Income-tax Act, 1961, it is proposed to remove the reference of such violation from section 351 of the Income-tax Act so as to align it with the Income-tax Act, 1961.
These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply to the tax year 2026-27 and subsequent tax years.
[Clause 68]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 68 of the Bill seeks to amend section 351 of the Income-tax Act, 2025 relating to specified violation.
It is proposed to amend clause (b) of sub-section (1) of the said section so as to omit the reference of section 346 and further to make consequential amendment thereto.
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
68. Amendment of section 351.
In section 351 of the Income-tax Act, in sub-section (1),––
(i) in clause (b), the word and figures “or 346” shall be omitted;
(ii) in clause (c), for the word “ensure”, the word “enure” shall be substituted.
