Chapter XVII-B of Income Tax Act 2025, lays down special provisions for registered NPOs. The computation of Income of Trust under leads to some areas of obscurity leading to litigation for such truts. The provisions of new law, bring more clarity, though absolute clarity in Indian laws is a wishful thinking. In this article we have tried to analyse various provisions of new law to lay down in objective manned the precise callulation crieteria for registered NPOs.
Computation of Total Income for Registered NPOs
A. Computation of Regular Income
a. Income from Charitable or religious Activity, for which NPO is registered, carried out by it during the tax year [S.335(a)]
b. Income from property, deposit or Investment held wholly for charitable or religious purposes [S.335(b)]
c. Voluntary Contributions received by registered NPO [S.335(d)]
d. Gains from Commercial Activity permissible u/s 334 to 336 computed in the manner as business income as per Chapter IV-D by maintaining separate books of Accounts [S.335( e)]
Less: Revenue Expenditure
a. “Incurred” In India [S.353(3)(a)] (Sum Payable for expenditure also to be allowed)
b. Expenditure for the objects of registered NPO [S.353(3)(b)]
c. Depreciation [S.353(3)( e)]
Add: Disallowed Revenue Expenditure
a. Expenditure Incurred outside India [S.353(3)(a)]
b. Expenditure not for the objects of the registered NPO [S.353(3)(b)]
c. Expenditure out of opening Corpus
d. Expenditure out of loans/borrowings [S.353(3)(d)]
e. Depreciation against asset acquisition of which allowed as application [S.353(3)( e)]
f. Contribution/Donation to any person [S.353(3)(f)]
g. Disallowance u/s 36(4) to 36(7) for cash expenditure> Rs. 10000 [S.353(3)(g)]
h. Disallowance for TDS non compliance u/s 35(b)(i) [S.353(3)(h)]
= Taxable Regular Income u/s 353 without compliances
Less: Application of Income
a. Capital Expenditure
b. Application for charitable or religious purposes in India for which NPO is registered “paid ” during tax year after complying section 35(b)(i) and 36(4) to 36(7) [S.341(1)(a)]
c. Donation/contribution to any person including unregistered NPO
d. 85% of donation to registered NPO [S.341(1)(b)]
e. Investment/deposit back of Corpus [S.341(2)(a)]
f. Repayment of loan/borrowing [S.341(2)(b)]
g. Deemed Application u/s 341(5)
h. Accumulation u/s 342
i. Deemed Accumulation to the extent of 15% out of balance sum u/s 343
=
Regular Taxable Income for the Purpose of S.334
B. Residual Income
a. Income from Charitable or religious activity not as per objects of Registered NPO
b. Income from charitable or religious activity not carried out during the tax year but carried out prior to tax year i.e. Prior Period Income
Note for residual Income:
i. There is no specific definition of residual income in Chapter XVII-B
ii. Accumulation of Total Income u/s 342 is allowed against only regular income and not against residual income
iii. Deemed accumulation @ 15% u/s 343 is allowed only against regular income and not against residual income
iv. Application of Income u/s 341(1) to 341(4) does not place any embargo on application of residual income
v. Deemed application u/s 341(5) to 341(8) can be done only against regular income and not against residual income
C. Computation of Specified Income [S.337] taxable @ 30%
1. Anonymous donation [excluding donation up to 5% of total donation or Rs. 100000/- which ever is higher]
2. Income applied directly or indirectly for the benefit of related person
3. Income applied outside India without CBDT approval u/s 338(a)
4. Investment/Deposit in contravention of section 350 out of :
a. Income
b. Accumulated Income
c. Deemed Accumulated Income
d. Corpus
e. Deemed Corpus
f. Any other Fund
5. Deemed Corpus Donation received for renovation/repair of temple etc. for which any condition u/s 340 is contravened
6. Application out of Accumulated Income other than for charitable/religious for which it is accumulated
7. Accumulated Income u/s 342 ceasing to be so accumulated
8. Accumulated Income u/s 342 not applied as per section 341(1) to 341(4) with in period of accumulation
9. Accumulated Income u/s 342 credited or paid to another registered NPO
10. Any income applied to purposes other than charitable or religious purposes
11. Income of business under taking computed in excess of income in books of accounts u/s 344
12. FMV of asset not held in forms specified in Para 1 to 30 of Sch XVI
13. Deemed application u/s 341(5) not applied with in time u/s 341(6)
= Total Income of registered NPO
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