Draft Rules 182 and 183 of the Draft Income-tax Rules, 2026 lay down detailed mechanisms for taxation of commercial activities and related-party benefits of registered non-profit organisations (NPOs). Rule 182 provides that gains from permissible commercial activities under sections 344, 345 and 346, read with section 335(e), must be computed as if such activities were carried out by a separate entity distinct from the NPO. It mandates maintenance of separate books of account and requires computation of gains in accordance with Part D of Chapter IV of the Act, thereby ring-fencing commercial income from charitable operations.
Rule 183 prescribes the method for computing income applied directly or indirectly for the benefit of a related person under section 337. It lists specific situations such as loans without adequate security or interest, use of property without adequate rent, excessive salary payments, provision of goods or services without adequate consideration, purchase or sale of assets at non-arm’s length prices, diversion of income or property, and investment in concerns where related persons hold substantial interest. In such cases, the taxable amount shall be the value of the benefit or facility provided free of cost or at a concessional rate. The term “related person” is defined as per section 355(h), ensuring statutory clarity and preventing misuse of charitable funds.
Extract of Rule No. 182 and 183 of Draft Income-tax Rules, 2026
Rule 182
Manner of computation of gains of commercial activities under section 335(e) and section 344 of the Act.
For the purposes of section 335(e), gains of any commercial activity permissible under sections 344, 345 and 346, carried out by a registered non-profit organisation for a tax year, shall be computed in the following manner, namely: __
(a) such commercial activity shall be treated as if it is entity separate from the registered non-profit organisation;
(b) separate books of accounts are maintained for such activities; and
(c) gains from such commercial activity during the tax year shall be computed as per the provisions of Part D of Chapter IV of the Act.
Rule 183
Manner of computation of any portion of income applied by a registered non-profit organisation, directly or indirectly, for the benefit of any related person.
(1) For the purposes of section 337 [Table: Sl. No. 2], any income or part thereof applied directly or indirectly for the benefit of any related person during the tax year, shall be computed in the manner as provided in sub-rule (2), in the following circumstances: __
(a) if any part of the income or property of the registered non-profit organisation is, or continues to be, lent to any related person for any period during the tax year without adequate security;
(b) if any part of the income or property of the registered non-profit organisation is, or continues to be, lent to any related person for any period during the tax year without adequate interest;
(c) if any land, building or other property of the registered non-profit organisation is, or continues to be, made available for the use of any related person, for any period during the tax year without charging adequate rent or other compensation;
(d) if any amount is paid by way of salary, allowance or otherwise during the tax year to any related person out of the resources of the registered non-profit organisation for services rendered by that person to such registered non-profit organisation and the amount so paid is in excess of what may be reasonably paid for such services;
(e) if any services or goods or both are made available by any registered non-profit organisation to any related person during the tax year without adequate consideration or other compensation;
(f) if any share, security or other property is purchased by or on behalf of the registered non-profit organisation from any related person during the tax year for consideration which is more than adequate;
(g) if any share, security or other property is sold by or on behalf of the registered non-profit organisation to any related person during the tax year for consideration which is less than adequate;
(h) if any income of the registered non-profit organisation, where the aggregate of the income exceeds one thousand rupees, is diverted during the tax year in favour of any related person;
(i) if any property of the registered non-profit organisation, where value of the property exceeds one thousand rupees, is diverted during the tax year in favour of any related person;
(j) if any funds of the registered non-profit organisation are, or continue to remain, invested for any period during the tax year (not being a period before the 1st day of January, 1971), in any concern in which any related person has a substantial interest.
(2) The income referred to in sub-rule (1) shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to the related person.
(3) For the purposes of this rule “related person” shall have the meaning as assigned to it in section 355(h).
