Application for approval for purpose of section 133(1)(b)(ii)
[Section-354 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 354(1) of Income Tax Act 2025
354(1) A registered non-profit organisation or a person referred to in Schedule III (Table: Sl. No. 1) may, for the purpose of section 133(1)(b)(ii), make an application for approval in such form and manner, as prescribed, to the Principal Commissioner or Commissioner, subject to the following conditions:––
- (a) it is not expressed to be for the benefit of any particular religious community or caste;
- (b) it is established in India for a charitable purpose and does not incur any expenditure of an amount being 5% or more of its total income during a tax year which is of a religious nature;
- (c) the instrument under which it is constituted does not, or the rules governing it do not, contain any provision for the transfer at any time of the whole or any part of its assets for any purpose other than a charitable purpose;
- (d) it maintains regular accounts of its receipts and expenditure;
- (e) it prepares such statement for such period, as prescribed, and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time, as prescribed;
- (f) it delivers to the said prescribed authority, a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under clause (e) in such form and verified in such manner, as prescribed; and
- (g) it furnishes a certificate to the donor specifying the amount of donation within such period from the date of receipt of the donation containing the requisite particulars in the manner, as prescribed.
Section 354(2) of Income Tax Act 2025
354(2) The application under sub-section (1) shall be made in respect of the cases referred to in column B of the Table below within the time limit provided in column C of the said Table and the Principal Commissioner or Commissioner, on receipt of such application, shall follow the procedure provided in sub-sections (3) and (4), and shall pass an order in writing within the time limit provided in column D and approval, if granted, shall be valid for a period provided in column E of the said Table.
Table
| Sl. No. | Case | Time limit for furnishing application | Time limit for passing the order | Validity of approval |
|---|---|---|---|---|
| A | B | C | D | E |
| 1 | Where the activities of the applicant have not commenced. | At any time during the tax year from which approval is sought. | One months from the end of the month in which application is made. | Three tax years commencing from the tax year in which such application is made. |
| 2 | Where the activities of the applicant have commenced. | At any time during the tax year from which approval is sought. | Six months from the end of the quarter in which application is made. | Five tax years commencing from the tax year in which such application is made. |
| 3 | Where the applicant has provisional approval and activities have commenced. | Within six months of the commencement of activities. | Six months from the end of the quarter in which application is made. | Five tax years commencing from the tax year in which such application is made. |
| 4 | Where the provisional approval of the applicant is due to expire and activities have not commenced. | At least six months prior to the expiry of the provisional approval. | Six months from the end of the quarter in which application is made. | Five tax years following the tax year in which such application is made. |
| 5 | Where the period for approval of a registered non-profit organisation is due to expire. | At least six months prior to the expiry of the said approval. | Six months from the end of the quarter in which application is made. | Five tax years following the tax year in which such application is made. |
Section 354(3) of Income Tax Act 2025
354(3) Where an application has been made in any of the cases specified under sub-section (2) (Table: Sl. No. 2) to (Table: Sl. No. 5), the Principal Commissioner or Commissioner shall call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself as to the compliance of such requirements of any other law in force, as are material for the purpose of achieving its objects, and the genuineness of activities and––
354(3)(a)if he is so satisfied about the objects and the genuineness of the activities and compliance of the requirements of any other law in force, he shall pass an order in writing approving it; or
354(3)(b)if he is not so satisfied, after affording a reasonable opportunity of being heard,––
- (i) shall pass an order in writing rejecting the application, where the application was made in any of the cases specified in sub-section (2) (Table: Sl. No. 2); and
- (ii) in any other case, shall pass an order rejecting the application and also cancelling the approval,
- and send a copy of the order to the applicant and the Assessing Officer.
Section 354(4) of Income Tax Act 2025
354(4)Where an application has been made in any of the cases specified in sub-section (2) (Table: Sl. No. 1), the Principal Commissioner or Commissioner shall pass an order granting provisional approval.
FAQs on Section 354 of Income Tax Act 2025
Who can apply for approval under section 354(1) of the Income Tax Act, 2025?
A registered non-profit organisation or a person referred to in Schedule III (Table: Sl. No. 1) can apply for approval for the purposes of section 133(1)(b)(ii).
What are the conditions to be fulfilled for making an application under section 354(1)?
The applicant must satisfy the following conditions:
(a) Not be for the benefit of any particular religious community or caste.
(b) Be established in India for a charitable purpose and not incur 5% or more of its total income on religious expenditure.
(c) Its founding instrument or rules must not allow transfer of assets for non-charitable purposes.
(d) Maintain regular accounts of receipts and expenditure.
(e) Prepare and submit prescribed statements in prescribed form, manner, and time.
(f) Furnish correction statements to rectify or update the earlier furnished statement.
(g) Furnish a certificate to the donor within the prescribed period stating the amount of donation and other required particulars.
What is the form and manner of application under section 354(1)?
The form and manner of the application shall be as prescribed by the rules under the Income Tax Act, 2025.
What is the timeline for making an application and validity of approval for new applicants whose activities have not commenced?
Application can be made any time during the tax year from which approval is sought.
Order must be passed within one month from the end of the month in which the application is made.
Approval is valid for three tax years starting from the tax year in which the application is made.
What is the timeline and validity for applicants whose activities have commenced?
Application can be made any time during the tax year from which approval is sought.
Order must be passed within six months from the end of the quarter in which the application is made.
Approval is valid for five tax years from the tax year in which the application is made.
When should an applicant with provisional approval and commenced activities apply for approval?
Such applicant must apply within six months of the commencement of activities.
What is the procedure if the provisional approval is about to expire and the applicant’s activities have not commenced?
Application must be made at least six months prior to expiry of provisional approval.
Order must be passed within six months from the end of the quarter in which the application is made.
Approval, if granted, will be valid for five tax years following the tax year in which the application is made.
What is the procedure for a registered non-profit organisation whose existing approval is about to expire?
Application must be filed at least six months before the expiry of the current approval.
Order must be passed within six months from the end of the quarter in which the application is made.
Approval will be valid for five tax years following the tax year in which the application is made.
What will the Principal Commissioner or Commissioner do upon receiving the application?
They will examine documents, information, and make necessary inquiries to verify the compliance with other applicable laws and genuineness of activities.
What happens if the Principal Commissioner or Commissioner is satisfied with the genuineness of activities and compliance?
They will issue a written order approving the application.
What happens if the Principal Commissioner or Commissioner is not satisfied after providing a hearing opportunity?
For applicants in case 2 (activities commenced): the application will be rejected.
In other cases: the application will be rejected and any existing approval will be cancelled.
A copy of the order will be sent to both the applicant and the Assessing Officer.
What is the process for applicants under case 1 (activities not commenced)?
They will be granted provisional approval directly by written order.
Is furnishing of donor certificate mandatory?
Yes, the organisation must furnish a certificate to the donor specifying donation details within the prescribed period in the prescribed manner.
