Benefits to related persons
[Section-445 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 445(1) of Income Tax Act 2025
445(1) If during any proceedings under this Act, it is found that a registered non-profit organisation has any specified income which is chargeable to tax as per section 337 (Table: Sl. No. 2), the Assessing Officer may impose on such person, a penalty of—
- 445(1)(a) a sum equal to the aggregate amount of income applied, directly or indirectly, by such person, for the benefit of any related person referred to in section 355(i), if the violation is noticed for the first time during any tax year; and
- 445(1)(b) a sum equal to 200% of the aggregate amount of income of such person applied, directly or indirectly, by that person for the benefit of any person referred to in section 355(i), if the violation is noticed again in any subsequent tax year.
FAQs on Section 445 of Income Tax Act 2025
What does Section 445(1) of the Income Tax Act, 2025 deal with?
Section 445(1) deals with penalties imposed on registered non-profit organisations that have applied income for the benefit of related persons, as defined in section 355(i), in contravention of the provisions specified in section 337.
When is a penalty imposed under Section 445(1)?
A penalty is imposed if, during proceedings under the Act, it is found that the organisation has any specified income chargeable to tax under Sl. No. 2 of the Table in section 337, and it has been used directly or indirectly for the benefit of related persons.
Who are considered ‘related persons’ for the purpose of this penalty?
‘Related persons’ are those defined under section 355(i) of the Income Tax Act, 2025.
What is the penalty if such a violation is found for the first time?
If the violation is noticed for the first time during any tax year, the penalty is equal to the aggregate amount of income applied, directly or indirectly, for the benefit of any related person.
What is the penalty if the violation is repeated in subsequent tax years?
If the violation is found again in any subsequent tax year, the penalty is increased to 200% of the aggregate amount of income applied for the benefit of any related person.
Is the penalty imposed only if the benefit is given directly?
No, the penalty applies whether the benefit is provided directly or indirectly to any related person.
What kind of income is referred to as ‘specified income’ under this section?
‘Specified income’ refers to the type of income chargeable to tax under Sl. No. 2 of the Table in section 337.
Who has the authority to impose the penalty under Section 445(1)?
The Assessing Officer has the authority to impose the penalty under Section 445(1).
Does the penalty apply only to unintentional violations?
The section does not differentiate between intentional and unintentional violations; the application of income for the benefit of related persons in violation of the Act triggers the penalty regardless of intent.
Can the penalty under Section 445(1) be waived or reduced?
The Act does not provide any provision under Section 445 for waiver or reduction of the penalty once the violation is established.
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