Restriction on commercial activities by registered non-profit organisation, carrying out advancement of any other object of general public utility
[Section-346 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
No registered non-profit organisation, carrying out advancement of any other object of general public utility, shall carry out any commercial activity unless,—
- (a) such commercial activity is undertaken in the course of actual carrying out of advancement of any object of the general public utility;
- (b) the aggregate receipts from such commercial activity or activities do not exceed 20% of the total receipts of such registered non-profit organisation of the relevant tax year; and
- (c) separate books of account are maintained by such registered non-profit organisation for such activities.
FAQs on Section 346 of Income Tax Act 2025
What does Section 346 restrict for registered non-profit organisations?
Section 346 restricts registered non-profit organisations carrying out the advancement of any other object of general public utility from engaging in commercial activities, except under certain conditions.
Can a registered non-profit organisation carry out commercial activities at all?
Yes, but only if the commercial activity is undertaken in the course of actually carrying out the advancement of a general public utility object, and other specific conditions are met.
What is the monetary limit on commercial activity receipts for such organisations?
The total receipts from commercial activities must not exceed 20% of the total receipts of the registered non-profit organisation in the relevant tax year.
Is maintaining separate books of account mandatory for commercial activities?
Yes, separate books of account must be maintained for such commercial activities to comply with Section 346.
What is meant by ‘advancement of any other object of general public utility’?
It refers to a category of charitable purpose aimed at promoting general welfare that benefits the public at large, excluding religious or educational purposes specifically covered elsewhere.
Will a non-profit organisation lose its registration if it violates Section 346?
Yes, failure to comply with the conditions of Section 346 may lead to consequences such as denial of tax exemption or cancellation of registration under the Income Tax Act, 2025.
Does this restriction apply to all non-profit organisations?
No, it applies only to those registered non-profit organisations whose purpose is the advancement of any other object of general public utility.
From when is Section 346 applicable?
Section 346 is applicable from 1st April, 2026.
Can the 20% limit be increased under any circumstances?
No, the Act does not provide for any relaxation or increase in the 20% cap on commercial receipts.
What happens if the 20% limit is exceeded in a tax year?
Exceeding the 20% limit may result in the organisation being treated as having a non-charitable purpose, thereby losing tax exemptions for that year.
Are activities like selling products made by beneficiaries considered commercial?
Such activities may be considered commercial; however, they must still satisfy the condition of being in the course of actual advancement of the object and stay within the 20% threshold with separate books maintained.
Does this section affect the organisation’s ability to raise funds through donations?
No, donations are not considered commercial receipts and are not subject to the 20% restriction.
What records must be kept to comply with Section 346?
Organisations must maintain separate books of account for each commercial activity to clearly segregate them from charitable activities.
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