The Finance Bill, 2026 proposes an amendment to clarify and align the definition of “specified fund” under Schedule VI of the Income-tax Act, 2025 with the existing definition contained in section 10(4D) of the Income-tax Act, 1961. Currently, Serial Numbers 1 to 4 of Schedule VI apply to income of a specified fund operating in or earning income from an International Financial Services Centre, with the term defined in Note 1(g) of the Schedule. To remove ambiguity and ensure consistency across the tax framework, Note 1(g) is proposed to be substituted to expressly mirror the section 10(4D) definition. The amendment specifies conditions relating to unit holding patterns, including that all units (other than those held by the sponsor or manager) must be held by non-residents, subject to limited exceptions where a non-resident subsequently becomes a resident and resident holdings remain within a 5% threshold and prescribed conditions. A consequential change extends a related timeline from 2025 to 2030. These amendments take effect from 1 April 2026 and apply from tax year 2026–27 onwards.
Amendment in the provision relating to merger of non-profit organisations (NPOs)
Existing provisions of section 352(4) [Table: Sl. No. 8.B] inter alia provides that the specified person shall be liable to pay the tax on accreted income where it has merged with any other entity other than a registered non-profit organisation having the same or similar objects. However, the said provision does not capture the situation where a registered nonprofit organisation has merged with any other registered non-profit organisation having same or similar objects as was provided under section 12AC of the Income-tax Act, 1961.
In order to provide for the provisions similar to section 12AC of the Income-tax Act, 1961 it is proposed to insert a new Section 354A in the Income-tax Act to provide that where any registered nonprofit organisation has merged with any other registered nonprofit organisation, the provisions of section 352 shall not apply if, —
(a) the other registered non-profit organisation has same or similar objects; and
(b) the said merger fulfils such conditions as may be prescribed.
Further, in order to align the existing provisions with the provisions of Income-tax Act, 1961 it is proposed to amend said serial number 8 of Table below section 352(4) so as to provide that the specified person shall be liable to pay the tax on accreted income where it has merged with, any other __
(a) entity other than a registered non-profit organisation;
(b) registered non-profit organisation having objects same or similar to it but the said merger does not fulfil such conditions, as may be prescribed; or
(c) registered non-profit organisation that does not have same or similar objects.
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.
[Clauses 69 and 70]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 69 of the Bill seeks to amend section 352 of the Income-tax Act relating to tax on accreted income.
It is proposed to substitute serial number 8 and entries relating thereto of the Table in sub-section (4) of the said section so as to provide that the specified person shall be liable to pay tax on accreted income, where it has merged with, any other __
a. entity other than a registered non-profit organisation; or
b. registered non-profit organisation having objects same or similar to it but the said merger does not fulfil such conditions, as may be prescribed; or
c. registered non-profit organisation that does not have same or similar objects. This amendment will take effect from 1st April, 2026.
Clause 70 of the Bill seeks to insert a new section 354A in the Income-tax Act, 2025 relating to merger of registered non-profit organisations in certain cases.
It is proposed to insert a new section 354A so as to provide that where any registered non-profit organisation has merged with any other registered non-profit organisation, the provisions of section 352 shall not apply if, —
a. the other registered nonprofit organisation has same or similar objects; and
b. the said merger fulfils such conditions as may be provided by rules. This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
69. Amendment of section 352.
In section 352 of the Income-tax Act, in sub-section (4), in the Table, for serial number 8 and the entries relating thereto, the following shall be substituted, namely:––
| A | B | C | D |
| (i) | (ii) | ||
| 8. | The specified person has merged with any other—
(a) entity other than a registered non-profit organisation; or (b) registered non-profit organisation having objects same or similar to it but the said merger does not fulfil such conditions, as may be prescribed; or (c) registered non-profit organisation that does not have same or similar objects. |
The date of merger | The date of merger |
70. Insertion of new section 354A.
After section 354 of the Income-tax Act, the following section shall be inserted, namely:––
“354A. Where any registered non-profit organisation merges with any other registered non-profit organisation, the provisions of section 352 shall not apply if, —
(a) the other registered non-profit organisation has same or similar objects; and
(b) the said merger fulfils such conditions as may be prescribed.”.
