Income Tax Act 2025: Section 341 for Tax Year 2026-27

Application of income

[Section-341 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 341(1) of Income Tax Act 2025

341(1) The following sums shall be allowed as application of income to a registered non-profit organisation:––

• 341(1)(a) any sum applied by it for charitable or religious purpose in India for which it is registered where such sum is,––
  • (i) paid during such tax year; and
  • (ii) such payment is allowable under sections 36(4), (5), (6) and (7) and 35(b)(i);
• 341(1)(b) 85% of the sum paid by way of donation made to any other registered non-profit organisation; and
• 341(1)(c) nil, with respect to any sum paid as a corpus donation to any other registered non-profit organisation.

Section 341(2) of Income Tax Act 2025

341(2) The application of income under sub-section (1) shall include the following:––

• 341(2)(a) the amount invested or deposited back during the tax year, in the modes permitted under section 350 maintained specifically for such corpus, if––
  • (i) such investment or depositing back is made within five years from the end of the tax year in which such application of income was made from the corpus; and
  • (ii) the application of income from the corpus is made after the 31st March, 2021 and there was no violation of any provision of this Part, or any corresponding provision of the Income-tax Act, 1961 with respect to such application;
• 341(2)(b) the amount repaid, during the tax year, towards any loan or borrowing where,––
  • (i) such repayment is within five years from the end of the tax year in which such application of income was made from the loan or borrowing; and
  • (ii) the application of income from the loan or borrowing is made after the 31st March, 2021 and there was no violation of any provision of this Part, or any corresponding provision of the Income-tax Act, 1961 with respect to such application.

Section 341(3) of Income Tax Act 2025

341(3) The following claims shall not be allowed as application of income under sub-sections (1) and (2):––

• (a) the deduction or allowance by way of depreciation or otherwise claimed in respect of an asset acquisition of which has been claimed as an application of income in the same or any other tax year under this Part or under any corresponding provision of the Income-tax Act, 1961; or
• (b) a claim of set off or deduction or allowance of any excess application of any of the years preceding the tax year.

Section 341(4) of Income Tax Act 2025

341(4) An application from corpus, loan or borrowing, accumulated income, specified income or deemed accumulated income shall not be considered as application for the purpose of sub-sections (1) and (2).

FAQs on Section 341 of Income Tax Act 2025

What is meant by “application of income” under Section 341(1) of the Income Tax Act, 2025?
Application of income refers to the actual utilization of income by a registered non-profit organisation towards its charitable or religious purposes in India for which it is registered. Such application includes payments made during the tax year, donations to other registered NPOs (up to 85%), and excludes corpus donations made to other NPOs.

What conditions must be satisfied for a payment to be considered as application under Section 341(1)(a)?
The sum must be paid during the tax year, and the nature of the payment must be allowable under sections 36(4), (5), (6), (7) and 35(b)(i) of the Income Tax Act, 2025.

Are donations made to other registered non-profit organisations considered application of income?
Yes, 85% of the donation made to another registered non-profit organisation is considered as application of income under Section 341(1)(b).

Are corpus donations made to another non-profit organisation treated as application of income?
No, corpus donations made to any other registered non-profit organisation are not treated as application of income under Section 341(1)(c).

Can an amount invested back into the corpus be treated as application of income?
Yes, under Section 341(2)(a), an amount invested or deposited back into the specified modes for corpus is treated as application, provided the reinvestment is within five years from the end of the year of application and the original application was made after 31st March 2021 without violating the provisions.

Is repayment of a loan considered application of income?
Yes, under Section 341(2)(b), repayment of a loan or borrowing used for application is considered as application of income, if repayment is made within five years from the end of the tax year in which the loan was applied, and the application was made after 31st March 2021 without any violations.

Can depreciation on assets already claimed as application be considered again?
No, Section 341(3)(a) disallows depreciation or any deduction for assets whose cost has already been claimed as application of income in the same or any earlier tax year.

Is excess application from previous years allowable as a deduction?
No, under Section 341(3)(b), set-off, deduction, or allowance of any excess application from prior years is not permitted as application of income.

Can application from corpus or loans be considered application of income?
No, as per Section 341(4), any application from corpus, loans or borrowings, accumulated income, specified income, or deemed accumulated income is not treated as application of income under Sections 341(1) and 341(2).