22/05/2026
NGOs Reclassified as RNPOs in Income Tax Act 2025: Key Compliance Changes for Non-Profits
The Income Tax Act, 2025, which supersedes the 1961 Act from 1 April 2026, introduces significant changes to the taxation of NGOs, trusts, and Section 8 Companies. The most notable change is the introduction of a single framework for all charitable and religious entities, known as “Registered Non-Profit Organisations” or RNPOs.
1. New RNPO Concept
- Chapter XVII Part-B of the 2025 Act is a dedicated section titled “Special Provisions for Registered Non-Profit Organisations”.
- The term “charitable purpose” is defined under section 2(23) to include: relief of the poor, education, yoga, medical relief, preservation of the environment, monuments/objects of artistic/historic interest, and advancement of any other object of general public utility.
- Only entities constituted in India for wholly charitable/religious purposes with assets held for public benefit under an irrevocable trust qualify. Permitted forms include Public Trusts, Registered Societies, Section 8 Companies, government-funded institutions, etc.
2. Old vs New Section Mapping
- Registration: The erstwhile Sections 12A/12AA/12AB are now covered under section 332 as RNPO registration.
- Income & Taxation: The Sec 11-13 regime has been replaced by Sec 334-337. Income is now split into three types:
- Regular Income – Sec 335: Exempt if 85% is applied/accumulated for charitable purposes. Includes activity income, property income, voluntary contributions, incidental business.
- Specified Income – Sec 337: Taxed at 30%. Includes anonymous donations, benefits to related persons, income applied outside India, investments violating Sec 350, misapplied accumulations.
- Residual Income – Sec 355(J): Taxed at normal slab rates. Covers income not fitting other categories, such as activities outside objects or prior period income.
- Donor Approval: Separate 80G approval has been merged into the RNPO framework. There is no standalone 80G approval process now.
3. Key Reliefs and Compliance Changes
- Automatic Transition: Existing registrations under 12A, 12AA, 12AB, 10(23C) are valid and deemed RNPOs. No fresh registration is required immediately. Validity continues for the balance period.
- Single Regime: The dual regimes of 10(23C) and 11-13 have ended. New applications under 10(23C) stopped after 1 October 2024. On expiry, entities must register under the second regime.
- Application Rules: 85% of donations to other RNPOs count as application. Corpus reinvestment and loan repayment within 5 years are allowed as application.
- Deemed Application: Shortfall below 85% can be treated as deemed application if applied in the current or next tax year. The due date has been relaxed to the ITR filing date, not 2 months before.
- Simplification: All NPO provisions have been consolidated into one chapter to reduce complexity for smaller organisations.
4. Updated Forms Under 2025 Act
- Income-tax Rules, 2026, and new simplified Forms were notified on 20 March 2026.
- ITR-7 has been updated for AY 2025-26 for trusts/NGOs with rationalised capital gains reporting.
Important for NGOs, Trusts, Section 8 Companies
1. You do not need to re-register now if you hold a valid 12A/12AB/10(23C) approval.
2. Track income buckets: misclassifying as “specified income” triggers 30% tax.
3. Ensure 80G donor compliance is met within RNPO registration; the separate 80G approval process is gone.
4. Use the new ITR-7 and updated forms from 1 April 2026.
