Other violations
[Section-353 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 353(1) of Income Tax Act 2025
353(1) Where any registered non-profit organisation––
- (a) fails to maintain books of account under section 347; or
- (b) fails to get books of account audited under section 348; or
- (c) fails to furnish its return of income under section 349; or
- (d) any registered non-profit organisation, carrying out advancement of any other object of general public utility, carries out any commercial activity in contravention of the provisions of section 346,
during any tax year, its regular income for such tax year as reduced by the expenditure referred to in sub-section (3) shall be taxable regular income which shall be chargeable to tax as per the provisions of section 334.
Section 353(2) of Income Tax Act 2025
353(2) In addition to the tax referred to in sub-section (1), the specified income and residual income of the registered non-profit organisation shall also be chargeable to tax under the provisions of section 334, to the extent not covered under taxable regular income under the said sub-section, and the provisions of section 338 shall not apply.
Section 353(3) of Income Tax Act 2025
353(3) The expenditure referred in sub-section (1) shall be computed subject to the following conditions:––
- (a) capital expenditure shall not be allowed;
- (b) such expenditure shall be incurred in India;
- (c) such expenditure shall be for the objects of the registered non-profit organisation;
- (d) such expenditure is not made from the corpus standing to the credit of the registered non-profit organisation as on the end of the tax year immediately preceding the tax year for which income is being computed;
- (e) such expenditure is not out of any loan or borrowing;
- (f) the claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income, in the same or any other tax year;
- (g) such expenditure is not in the form of any contribution or donation to any person;
- (h) such expenditure is not on account of a payment or aggregate of payments made to a person in contravention to the provisions of sections 36(4), (5), (6) and (7);
- (i) such payment is allowable under section 35(b)(i); and
- (j) set off or deduction or allowance of any application or expenditure other than those referred to in clauses (a) to (i) shall not be allowed.
FAQs on Section 353 of Income Tax Act 2025
What triggers taxation under Section 353(1) for a registered non-profit organisation?
Taxation is triggered if a registered non-profit organisation fails to maintain books under Section 347, fails to get them audited under Section 348, fails to file its return under Section 349, or undertakes commercial activity in violation of Section 346.
How is the taxable regular income determined under Section 353(1)?
It is computed as the regular income for the tax year, reduced by allowable expenditure as specified in Section 353(3).
What is the tax treatment under Section 353(2)?
In addition to tax on taxable regular income, the specified income and residual income not covered under subsection (1) will also be chargeable to tax under Section 334. Section 338 will not apply in this case.
What are the conditions for allowable expenditure under Section 353(3)?
Allowable expenditure must meet all the following:
(a) Capital expenditure is not allowed.
(b) It must be incurred in India.
(c) It must be for the objects of the registered non-profit organisation.
(d) It must not be from corpus funds as of the end of the prior tax year.
(e) It must not be financed by loans or borrowings.
(f) Depreciation is not allowed on assets whose acquisition has been treated as application of income.
(g) Expenditure must not be in the form of donations to others.
(h) It must not violate provisions of Sections 36(4) to (7).
(i) Payment must be allowable under Section 35(b)(i).
(j) No other form of application or deduction is allowed beyond clauses (a) to (i).
What happens if the non-profit organisation violates Section 346 by engaging in commercial activities?
Its regular income, as reduced by eligible expenditure under Section 353(3), becomes taxable regular income under Section 334.
Is capital expenditure ever allowed as deductible expenditure under Section 353?
No, capital expenditure is explicitly disallowed under clause (a) of Section 353(3).
Can expenditure made outside India be deducted?
No, under clause (b) of Section 353(3), only expenditure incurred in India is allowed.
Are donations or contributions made to others deductible under this section?
No, such outflows are not considered allowable expenditure under clause (g) of Section 353(3).
Is expenditure from corpus funds permitted?
No, expenditure made from corpus funds standing as of the end of the prior tax year is not allowed under clause (d) of Section 353(3).
Can loans or borrowed funds be used for allowable expenditure?
No, under clause (e), such expenditure will not be considered allowable.
Can depreciation be claimed on assets already treated as application of income?
No, depreciation in such cases is not permitted under clause (f) of Section 353(3).
If a non-profit complies with Section 346 but still fails in bookkeeping or auditing, will Section 353 still apply?
Yes, failure to comply with Sections 347, 348, or 349 independently triggers taxation under Section 353(1).
Does Section 338 apply if Section 353(2) is invoked?
No, the provisions of Section 338 are explicitly excluded in such cases.
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