Section 332 deals with the procedure for registration of Non-Profit Organisations (NPOs) for the purpose of claiming tax benefits under the Income-tax provisions relating to charitable and religious institutions. The section lays down the framework governing the process through which an organisation can obtain registration and become eligible to claim exemption benefits available to charitable and religious entities. The section specifically provides for
1. who can apply for registration
2. Eligibility conditions for registration
3. Timelines for application and validity of registration
4. Condonation of delay in Application
5. Extension of validity of registration for Small NPOs
6. Processing of Applications and Grant of Registration.
The above aspects are summarised and discussed in detail below.
1. Who can apply for registration [Section 332(1)]
The following entities can apply to the Principal Commissioner/Commissioner to be registered as a Non-Profit Organisation (NPO) to claim tax benefits:
a. Public trusts
b. Societies registered under the Societies Registration Act, 1860 or similar law in force in India
c. Section 8 companies (or old Section 25 companies)
d. Universities established by law or educational institutions affiliated or recognized by government.
e. Institutions funded fully or partly by Government or local authority
f. Any person as referred to in specified Schedules
g. Any other person notified by the Board
2. Eligibility Conditions for registration [Section 332(2)]
To qualify for registration:
- The person is constituted or registered or incorporated in India for carrying out charitable purpose as referred to in section 2(23) or public religious purposes and
- The property of such person must be held under an irrevocable trust:
- wholly for charitable/religious purposes in India, or
- Partly for charitable/religious purposes in India if formed before the Income-tax Act, 1961.
3. Timelines for application and validity of registration [Section 332(3)]
| SN | Situation | Time to Apply | Order Time | Validity |
| 1 | Activities not started | During the tax year | 1 month from the end of month in which application is made | 3 tax years from the tax year in which the application is made |
| 2 | Activities started but not previously registered | During the tax year | 6 month from the end of quarter in which application is made | 5 tax years from the tax year in which the application is made |
| 3 | Provisional registration but activities started | Within 6 months of starting activities | 6 month from the end of quarter in which application is made | 5 tax years from the tax year in which the application is made |
| 4 | Provisional registration expiring but activities not started | 6 months before expiry | 6 month from the end of quarter in which application is made | 5 tax years from the tax year in which the application is made |
| 5 | Renewal of existing registration | 6 months before expiry | 6 month from the end of quarter in which application is made | 5 tax years from the tax year in which the application is made |
| 6 | Registration became inoperative due to regime switch | During relevant tax year | 6 month from the end of quarter in which application is made | 5 tax years from the tax year in which the application is made |
| 7 | Objects modified | Within 30 days of change | 6 month from the end of quarter in which application is made | 5 tax years from the tax year in which the application is made |
5. Condonation of delay in Application
The Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in furnishing the application, condone such delay and such application shall be deemed to have been made within time. [Section 332(4)]
If any application for registration is not made within the specified time (Table: Sl. No. 3, 4, 5 or 7) and the delay in filing such application is not condoned by Principal Commissioner or Commissioner, such person shall be liable to pay tax on accreted income under section 352. [Section 332(6)]
4. Extension of Validity of registration for Small NPOs
If an application is made under Section 332(3) (Sl. No. 3–7 of the above table) and the applicant’s total income, before claiming exemption under this Part, does not exceed ₹5 crore in each of the two preceding tax years, then the validity period mentioned in Sl. No. 3 to 7 will be 10 years instead of 5 years. [Section 332(5)]
6. Processing of Applications and Grant of Registration
When an application is made under Section 332(3) (Sl. Nos. 2–7), the Principal Commissioner/Commissioner may call for documents, information, or conduct inquiries to verify the genuineness of activities, objects, and compliance with other relevant laws. [Section 332(7)]
- If satisfied → Registration is granted.
- If not satisfied → after giving the applicant an opportunity of being heard:
- Application rejected (for cases under No. 2 or 6).
- Application rejected and existing registration cancelled (for cases under Nos. 3, 4, 5, or 7).
If the application is made under Section 332(3) (Sl. No. 1), the Commissioner shall grant provisional registration. [Section 332(8)]
If a registration granted before 1 April 2021 has expired and the entity applies again, the Commissioner may condone the delay for reasonable cause and grant registration within three months, valid for five years from the beginning of FY 2021–22. [Section 332(9)]
Orders granting or rejecting registration under sub-sections (7), (8), and (9) must be issued in the prescribed form and manner [Section 332(10)]
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