Tax on accreted income
[Section-352 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 352(1) of Income Tax Act 2025
352(1) Every specified person shall, in addition to the income-tax chargeable in respect of his total income, be liable to pay additional income-tax on accreted income at the maximum marginal rate in any of the cases specified in column B of the Table in sub-section (5).
Section 352(2) of Income Tax Act 2025
352(2) The Assessing Officer shall compute the accreted income on the date, specified in column C of the Table in sub-section (5) and after affording a reasonable opportunity of being heard to the assessee, pass on order that such income shall be charged to tax under sub-section (1).
Section 352(3) of Income Tax Act 2025
352(3) The accreted income referred to in sub-section (1) shall be computed using the following formula:––
A = B-C
where,––
- A = Accreted income;
- B = Aggregate fair market value of the total assets of the specified person, as on the date specified, in column C of the Table in sub-section (5), computed in accordance with such method of valuation, as prescribed;
- C = Total liability of such specified person, as on the date specified in column C of the said Table, computed in accordance with such method of valuation, as prescribed.
Section 352(4) of Income Tax Act 2025
352(4) The accreted income, computed as per the provisions of sub-section (3) shall be reduced by such amount of accreted income as is attributable to specified assets, and liabilities, if any, related to such assets.
Section 352(5) of Income Tax Act 2025
352(5) The specified person and the principal officer or trustee of such specified person shall be liable to pay the tax on accreted income to the credit of the Central Government within fourteen days from the due date specified in column D of the Table below, or the date of order passed under sub-section (2).
Table
| Case | Case | Specified date | Due date for the payment of tax on accreted income |
|---|---|---|---|
| B(i) | B(ii) | C | D |
| 1. The registration granted to the specified person under any specified provision has been cancelled or withdrawn. | The specified person has preferred an appeal against the order of cancellation. | The date of the order cancelling the registration. | Date of receipt of the order in any appeal, confirming the cancellation of the registration, by the specified person. |
| 2. The registration granted to the specified person under any specified provision has been cancelled or withdrawn. | The specified person has not preferred an appeal against such order of cancellation. | The date of the order cancelling the registration. | The date on which the period for filing appeal under section 362 against the order cancelling the registration expires. |
| 3. (a) The specified person has adopted or undertaken modification of its objects during any tax year; and (b) such modified objects do not conform to the conditions of registration. | The specified person has not applied for fresh registration under any specified provision in such tax year. | The date of adoption or modification of any object. | The end of such tax year. |
| 4. (a) The specified person has adopted or undertaken modification of its objects during any tax year; and (b) such modified objects do not conform to the conditions of registration. | The specified person has applied for fresh registration under any specified provision in such tax year and where such application has been rejected and appeal has been preferred against such order of rejection. | The date of adoption or modification of any object. | The date of receipt of the order in any appeal, confirming the cancellation of the registration by the specified person. |
| 5. (a) The specified person has adopted or undertaken modification of its objects during any tax year; and (b) such modified objects do not conform to the conditions of registration. | The specified person has applied for fresh registration under any specified provision in the said tax year and where such application has been rejected and no appeal has been preferred against such order of rejection. | The date of adoption or modification of any object. | The date on which the period for filing appeal under section 362 against the order cancelling the registration expires. |
| 6. The specified person fails to make an application as per the provisions of–– (a) sub-clause (i) or (ii) or (iii) of the first proviso to section 10 (23C) of the Income-tax Act, 1961 (43 of 1961); or (b) sub-clause (i) or (ii) or (iii) of section 12(1)(ac) of the Income-tax Act, 1961 (43 of 1961); or (c) as specified in section 332(3) (Table: Sl. No. 3, 4, 5 or 7). | The period specified in the respective clause or sub-clauses or Table, as the case may be, expires in the tax year in which the said application is to be made. | The last date for making an application for registration. | The end of such tax year. |
| 7. Where a specified person converts itself into a form which is not eligible for grant of registration during any tax year. | The date of such conversion. | The end of such tax year. | |
| 8. The specified person has merged with any other entity other than a registered non- profit organisation having the same or similar objects and the said merger does not fulfil such conditions, as prescribed. | The date of merger. | The date of merger. | |
| 9. The specified person has failed to transfer upon dissolution, all its assets to any other registered non-profit organisation within twelve months from the end of the month in which the dissolution takes place. | The date of dissolution. | The date on which such period of twelve months expires. |
Section 352(6) of Income Tax Act 2025
352(6) The payment of tax on the accreted income by the specified person under this section shall be deemed as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by, or any deduction be allowed to, the specified person or any other person in respect of the amount of tax so paid under any other provision of this Act.
Section 352(7) of Income Tax Act 2025
352(7) Where the specified person, or the principal officer or trustee of such specified person, fails to pay the whole or any part of the tax on the accreted income within the time allowed under sub-section (5), such specified person, principal officer or trustee shall be liable to pay simple interest, computed as per the following formula:––
I = 1% of (T*P)
where,––
- I = interest;
- T = tax on accreted income; and
- P = number of months beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid including part thereof.
Section 352(8) of Income Tax Act 2025
352(8) All the provisions of this Act shall apply for the collection and recovery of income-tax in respect of the amount of tax payable by the specified person, principal officer or trustee and the following persons shall be deemed to be assessee in default:––
- (a) the specified person and principal officer or the trustee of such specified person;
- (b) the person to whom any asset forming part of the computation of accreted income under sub-section (3) has been transferred, where the tax on accreted income is payable under the cases specified in sub-section (5) (Table: Sl. No. 9).
Section 352(9) of Income Tax Act 2025
352(9) Subject to the provisions of sub-section (8), the liability of the person referred to in clause (b) of the said sub-section shall be limited to the extent to which the asset received by him is capable of meeting the liability.
FAQs on Section 352 of Income Tax Act 2025
What is accreted income under Section 352 of the Income Tax Act, 2025?
Accreted income refers to the net assets of a specified person calculated as the fair market value of total assets minus total liabilities on a specified date, as per the formula A = B – C, where A is accreted income, B is FMV of assets, and C is total liabilities.
Who is liable to pay tax on accreted income?
Every specified person is liable to pay additional income-tax on accreted income, in addition to regular income-tax, at the maximum marginal rate, in the cases listed in Section 352(5).
When is tax on accreted income applicable?
It becomes applicable in situations such as cancellation of registration, failure to apply for registration, conversion into an ineligible form, merger with a non-qualifying entity, or dissolution without proper asset transfer, as specified in the Table under Section 352(5).
How is the accreted income computed?
Accreted income is computed as A = B – C, where B is the aggregate fair market value of the total assets and C is the total liabilities of the specified person on the specified date, both computed as per prescribed valuation methods.
What happens if some assets and liabilities are attributable to specified purposes?
Accreted income is reduced by the amount attributable to specified assets and liabilities related to those assets as per Section 352(4).
What is the maximum marginal rate for taxation on accreted income?
The tax on accreted income is levied at the maximum marginal rate, which refers to the highest rate of income tax applicable under the Act.
What is the time limit for payment of tax on accreted income?
The tax must be paid within 14 days from either the due date specified in Column D of the Table under Section 352(5) or the date of the order passed under Section 352(2), whichever is applicable.
Who is considered a specified person under this section?
Specified person refers to an entity that was granted registration under specified provisions and falls under any of the scenarios listed in Section 352(5).
What if the specified person appeals a cancellation of registration?
If an appeal is preferred, the date for computing accreted income is the date of cancellation, and the due date for payment is the date of receipt of the appellate order confirming the cancellation.
What happens when no appeal is made against cancellation?
If no appeal is preferred, the due date for payment is the date when the period for filing an appeal expires.
What is the interest on delayed payment of tax on accreted income?
Simple interest at the rate of 1% per month (or part thereof) is levied on the unpaid tax amount from the day after the due date until the actual date of payment, as per Section 352(7).
Who is deemed to be in default if tax on accreted income is not paid?
The specified person, its principal officer or trustee, and in some cases the recipient of transferred assets, are deemed to be assessee in default under Section 352(8).
Is the tax paid on accreted income considered final?
Yes, the payment of such tax is deemed final, and no credit or deduction is allowed under any other provision for the tax so paid, as per Section 352(6).
Can liability be transferred to others in case of default?
Yes, if assets forming part of accreted income have been transferred, the transferee is also liable to the extent the asset can meet the liability, as per Section 352(9).
What happens in case of merger with a non-qualifying entity?
The date of merger becomes the date of computation and payment of tax on accreted income if the merger doesn’t meet the prescribed conditions.
What is the consequence of failing to transfer assets upon dissolution?
If a specified person fails to transfer its assets to another qualifying non-profit within 12 months from dissolution, tax on accreted income is payable, with liability extending to asset transferees under Section 352(8)(b).
