(INDIA) – India has reorganised the tax treatment of Charitable Trusts, religious institutions, educational institutions, hospitals, NGOs and other non-profits under the Income-tax Act, 2025, replacing a scattered set of older provisions with a single framework for Registered Non-Profit Organisations.

The shift changes how trustees, donors and overseas supporters assess registration, tax exemption, donor deduction and compliance. It also preserves many of the old rules in substance, including conditions on how income must be applied, how records must be kept and how institutions avoid private benefit.

Under the earlier law, charitable entities worked across multiple provisions of the Income-tax Act, 1961, including sections 11, 12, 12A, 12AA, 12AB, 13, 10(23C), 80G, 115BBC and 115TD. The new law places those issues into a more structured chapter instead of leaving them spread across separate sections.

That reorganisation does not remove the old discipline. A trust or institution still cannot assume it qualifies for exemption simply because it describes itself as charitable. It must satisfy registration rules, apply income for approved objects, maintain accounts, follow audit and reporting requirements, and meet the conditions attached to tax benefits.

The new terminology sits at the centre of the change. Public charitable trusts, registered societies, section 8 companies, universities, educational institutions, government-financed institutions and other eligible bodies now fall within the concept of Registered Non-Profit Organisations, or RNPOs.

Tax professionals once referred to 12AB registration, 80G approval, 10(23C) approval or section 11 exemption as separate labels. Under the Income-tax Act, 2025, that structure is recast around RNPO registration and approval, even though the legal substance remains familiar.

Objects must still be charitable, religious or otherwise eligible. Income still must be applied for approved purposes. Funds still cannot be misused for private benefit. Accounts, audit compliance and filing obligations still matter.

Section 332 now serves as the gateway for registration. Without registration under that provision, an organisation may not be able to claim the special tax treatment available to RNPOs.

Eligible applicants include public trusts, societies, section 8 companies, universities, recognised educational institutions, government-financed institutions and other eligible entities. The application must be made in the prescribed form and manner before the Principal Commissioner or Commissioner.

Entities already registered or approved under the previous regime face a procedural question rather than a philosophical one. Trustees and administrators need to check whether an existing registration continues, whether renewal is required and whether a fresh filing becomes necessary under the new structure.

Section 354 addresses a separate issue: donor deduction. Registration of the organisation and the donor’s ability to claim a deduction are linked, but they are not the same thing.

Under the older system, donors often looked to section 80G approval. Under the new law, the deduction framework is linked with section 133, while section 354 provides the approval mechanism for the institution. Registration alone does not automatically allow an organisation to issue receipts that qualify for donor deduction.

That distinction carries obvious weight for Indian taxpayers and for NRIs taxable in India. Anyone donating with the expectation of claiming a deduction needs to verify that the organisation holds valid approval for donor deduction under the new Act, not merely that it is registered as an RNPO.

The compliance system also introduces updated forms. Form 104 generally relates to provisional registration or provisional approval, while Form 105 is used for regular registration or approval.

The official Income Tax Department materials identify Form 105 as relevant to registration under section 332 and approval under section 354. Newly created trusts, societies and section 8 companies may first need provisional registration or approval before moving to regular status after activities begin or prescribed conditions are met.

Trustees cannot treat those filings as routine paperwork. A wrong or delayed form can affect exemption, donor confidence and later compliance, especially where institutions handle large donations, foreign contributions, school fees, hospital receipts or religious offerings.

Another feature that survives the transition is the 85% application rule. Under the older regime, charitable institutions broadly had to apply at least 85% of their income towards their objects, subject to rules on accumulation and permitted investments, and the new Act keeps that principle in substance.

Income received by an RNPO, whether from donations, school fees, hospital receipts, rent or investment income, must be applied for approved objects. If an institution does not apply income properly, or accumulates it outside the statutory conditions, tax consequences can follow.

That requirement goes beyond bookkeeping. An institution that raises money for education, religion, medical relief or public welfare must be able to show where the money went, why it was held, and whether any accumulation met the conditions laid down by law.

Commercial activity remains one of the harder fault lines. Many non-profits run schools, hospitals, hostels, training centres, publications, skill-development programmes, consulting units or community facilities that generate receipts.

The legal issue is whether those receipts arise from activity genuinely incidental to the charitable object or from activity that has become commercial in character. The new law still demands close examination of the nature of the activity, the use of surplus, the beneficiaries, the pricing model and the governing documents.

A school, hospital or welfare body therefore needs more than a charitable label. It must maintain records that show receipts were used for stated objects and not diverted for private gain, and that any surplus stayed within the institution’s approved purposes.

Donor transparency also remains part of the tax architecture. The earlier law contained specific provisions on anonymous donations, and the new framework continues to give weight to donor records and traceability.

That is especially relevant for temples, religious bodies, public donation drives, online fundraisers and NGOs that receive many small contributions. Institutions need records of donor identity, donation receipts, mode of payment and the purpose of the donation.

Foreign donations carry an added layer. When money comes from NRIs or overseas sources, income-tax compliance may intersect with FCRA, banking and anti-money-laundering rules, and income-tax registration does not by itself authorise an institution to receive foreign contribution.

The Act also carries forward the idea of taxing accreted income, which earlier sat in section 115TD. Under the RNPO framework, that risk remains for organisations that convert into a non-eligible form, merge with a non-eligible entity, fail to transfer assets to another eligible organisation on dissolution, or lose registration in circumstances covered by law.

That provision aims to stop charitable assets, built up under tax-favoured status, from moving into non-charitable or private hands. Trustees considering restructuring, merger, dissolution or an asset transfer need to examine the tax effect before taking those steps.

NRIs, Overseas Citizens of India, foreign citizens of Indian origin and Indian families abroad face several practical checks under the new regime. They need to confirm that the Indian organisation is properly registered, that donor deduction approval is valid if an Indian tax claim is expected, and that foreign contribution rules are met where money is sent from outside India.

Indian tax approval also does not settle the donor’s tax position abroad. A donation cleared under Indian law may not automatically qualify for a deduction in the United States, United Kingdom, Canada, Australia or Singapore, because each country applies its own tax rules.

Governance arrangements draw similar scrutiny. NRIs who serve as trustees, founders or major donors need to avoid structures that appear to confer private benefit on related persons, including founders, trustees, relatives, related entities or controlled businesses.

Existing institutions face a long compliance review rather than a one-time label change. Registration status, donor approval status, governing documents, accounts, audit reports, investment pattern and filing history all need to match the new RNPO framework.

Trust deeds and memoranda should reflect charitable or religious objects clearly. Activities should match those objects, funds should be applied to approved purposes, investments should stay within permitted modes, and payments to related persons should be reasonable and documented.

Many organisations will also need to revise the language they use in receipts, internal papers and public communications. References to sections 11, 12AB, 10(23C) or 80G that once defined status under the old regime may no longer describe the organisation’s position accurately under the Income-tax Act, 2025.

The recast framework simplifies the map of the law but not the standard of conduct. Charitable purpose still begins with the objects of the institution, yet tax exemption depends on registration under section 332, donor-related approval under section 354 where needed, compliance with the 85% application principle, clean donor records and careful handling of any foreign contributions or restructuring.

For Registered Non-Profit Organisations, the administrative burden now sits in a clearer structure. Whether that clarity translates into smoother compliance will depend on how trustees, donors and managers respond before a filing error, a donor dispute or an exit-tax problem forces the issue.