Income Tax Act 2025 for NGOs: New Compliance Rules, Changes from the 1961 Act and Benefits for Charitable Organisations

Income Tax Act 2025 for NGOs is for India’s non-governmental organisations, charitable trusts, societies and other non-profit institutions play an important role in social development, environmental conservation, education, disaster response, public welfare, biodiversity protection, healthcare and sustainable development. Their financial sustainability depends on donations, CSR contributions, institutional grants, programme funding and public philanthropy. Consequently, income-tax compliance is not merely a statutory responsibility for an NGO. It is an important part of financial governance, donor confidence and institutional credibility.

The Income Tax Act, 2025 marks a major restructuring of India’s direct-tax framework. It replaces the Income Tax Act, 1961 for the new tax regime beginning from 1 April 2026, while transitional provisions preserve the treatment of earlier matters under the earlier law where applicable. The new legislation reorganises provisions, introduces the concept of a “tax year”, consolidates provisions relating to registered non-profit organisations and introduces a corresponding set of forms and procedures under the Income-tax Rules, 2026.

For NGOs, the transition should not be understood simply as a change in section numbers as per Income Tax Act 2025 for NGOs. It is an opportunity to review registration, exemption, donation reporting, audit, accounting, internal controls and statutory filing systems. Organisations that use the transition to strengthen their compliance architecture can improve their credibility with donors, CSR partners, government agencies and institutional funders.

What Is the Income Tax Act 2025 for NGOs?

The Income Tax Act, 2025 provides a reorganised statutory framework for registered non-profit organisations. It contains specific provisions dealing with registration, application of income, accumulation, audit, donations and related compliance.

One of the important changes is the use of the concept of a Registered Non-Profit Organisation, commonly referred to as an RNPO or registered NPO in the Income Tax Department’s guidance. Section 332 provides the registration framework, while Section 334 deals with the tax treatment of registered non-profit organisations. Section 341 deals with application of income, including the 85% application principle. Section 354 deals with donation-related approval and reporting.

The new framework does not mean that the basic charitable character of an organisation has become irrelevant. An NGO must continue to operate consistently with its approved objects, maintain proper records, apply its income in accordance with the law and comply with applicable conditions attached to its registration and approvals.

Why the Income Tax Act 2025 Matters for NGOs

The transition is particularly relevant because many NGOs have historically organised their tax compliance around Sections 11, 12, 12A, 12AA, 12AB and 80G of the Income Tax Act, 1961. Under the new legislation, corresponding provisions have been reorganised and renumbered.

The Income Tax Department has also issued a formal mapping of forms between the Income Tax Act, 1961 and the Income Tax Act, 2025. For example, the new Form 113 corresponds to the earlier Form 10BD for donation reporting, while Form 114 corresponds to Form 10BE for donation certificates.

This means that NGOs should update their statutory compliance calendars, accounting procedures, donor databases and documentation practices rather than continuing automatically with procedures designed exclusively for the 1961 Act.

Income Tax Act 2025 vs Income Tax Act 1961 for NGOs

The most important distinction is structural. Under the Income Tax Act, 1961, charitable organisations were governed through provisions distributed across several sections, including Sections 11, 12, 12A, 12AA, 12AB and 80G. The Income Tax Act, 2025 reorganises the framework around registered non-profit organisations and introduces corresponding provisions and forms.

Under the 1961 Act, NGOs commonly referred to their registration as “12A/12AB registration” and their donor benefit as “80G approval”. Under the new framework, the corresponding registration provisions are principally found in Section 332, while donation-related approval is addressed under Section 354. Donor deductions are dealt with under Section 133.

The new Act also replaces the traditional assessment-year terminology for the new framework with the concept of a tax year. This is intended to simplify the structure and language of the legislation.

Another important difference is the reorganisation of forms. The Income Tax Department has introduced Form 104 for provisional registration or approval, Form 105 for regular registration or approval and Form 113 and Form 114 for donation reporting and donor certificates.

The transition, however, is not a complete break with the past. The Income Tax Department has clarified that approvals and recognitions granted under the Income Tax Act, 1961 continue under the corresponding provisions of the 2025 Act, subject to the transitional provisions and consistency with the new law. It has also clarified that applications filed under the 1961 Act and pending at 31 March 2026 are dealt with under the applicable transitional provisions.

What Has Changed for NGOs Under the Income Tax Act 2025?

New Framework for Registered Non-Profit Organisations

The new legislation creates a more consolidated framework for registered non-profit organisations. Section 332 provides for registration of eligible entities, including public trusts, societies, Section 8 companies and specified institutions. The Income Tax Department’s Form 105 guidance identifies these categories and explains the registration process under the new framework.

For NGOs, this provides greater conceptual clarity. Organisations should now identify their status under the new statutory framework and ensure that their registration and approval records correspond with their actual legal structure and charitable activities.

New Registration Forms

For applications made after 1 April 2026, Form 104 is used for provisional registration or approval under the new Act. Form 105 is used for regular registration or approval in the circumstances specified by the law and rules. The Income Tax Department describes Form 105 as a consolidated application covering regular registration and donation-related approval in applicable cases.

This is important for newly established NGOs as well as existing organisations approaching renewal, conversion from provisional to regular registration or modification of objects.

Changes in Donation Reporting

Donation compliance has become particularly important under the new framework. Registered non-profit organisations receiving eligible voluntary donations are required to report prescribed donation information through Form 113. Form 114 is the corresponding certificate of donation for donors.

The Income Tax Department explains that Form 113 is submitted electronically and verified by an authorised signatory. Following filing, Form 114 certificates can be generated for donors through the e-filing system.

For NGOs, this makes donor-data management a core compliance function. The organisation should maintain accurate records of donor names, PAN where applicable, donation amount, date, payment mode and other prescribed information and reconcile these records with the bank statement and accounting system.

Changes in Application of Income

The familiar 85% application principle continues in the new framework. Section 341 provides that where the relevant regular income applied towards charitable or religious purposes is less than 85%, the shortfall may, subject to prescribed conditions, be treated as deemed application.

The new law also specifies circumstances in which certain amounts are treated as application and circumstances in which expenditure from corpus, loans or certain accumulated income is not treated as application.

This means that NGOs should not view the 85% requirement merely as an annual accounting calculation. Programme expenditure, grant utilisation, eligible administrative expenditure, project costs and other applications should be documented throughout the tax year.

Where an NGO intends to exercise the statutory option for deemed application, the new Form 108 corresponds to the earlier Form 9A framework and is used for the relevant option under Section 341(7).

Changes in Accumulation of Income

NGOs may need to accumulate income for future charitable programmes, infrastructure development, major environmental projects, disaster preparedness, educational programmes or other approved objectives.

The new framework contains specific provisions for accumulation and setting apart of income under Section 342. The Income Tax Department’s guidance identifies the corresponding forms and procedures under the Income-tax Rules, 2026.

NGOs should therefore ensure that proposed accumulation is supported by a defined charitable purpose, appropriate documentation and timely statutory compliance.

What Has Not Fundamentally Changed?

The introduction of the Income Tax Act, 2025 does not mean that every existing NGO must automatically obtain an entirely new tax registration from zero.

The Income Tax Department has specifically clarified that an approval or recognition granted under the Income Tax Act, 1961 continues after 1 April 2026 where it is not inconsistent with the corresponding provisions of the 2025 Act. It has also clarified that a provisional approval granted under the earlier Act does not automatically become invalid simply because the new Act commenced.

The underlying importance of genuine charitable activity, compliance with approved objects, appropriate application of income, maintenance of accounts and compliance with conditions of registration continues.

For NGOs, this provides continuity while requiring adaptation.

Does 80G Continue Under the Income Tax Act 2025?

The concept of tax benefits for eligible donations continues, but the statutory structure has changed.

Under the Income Tax Act, 1961, donor deductions were primarily associated with Section 80G. Under the Income Tax Act, 2025, the corresponding donor deduction framework is contained in Section 133, while approval and reporting for eligible charitable organisations are addressed through the new framework, including Section 354. The Income Tax Department’s Act text specifically provides for deduction in respect of donations to eligible registered non-profit organisations and specified institutions subject to applicable conditions.

Therefore, NGOs should avoid referring to their future compliance simply as “80G compliance” without considering the applicable provisions of the new Act.

For communication purposes, however, it is reasonable to state that the new framework is the successor to the earlier 80G-based donation-benefit system, provided the statutory distinction is explained accurately.

Impact on CSR-Funded NGOs

The new tax framework is particularly relevant to NGOs implementing CSR projects.

CSR departments generally expect NGOs to demonstrate statutory registration, financial accountability, project-wise utilisation, audited accounts, utilisation certificates and evidence of programme implementation. A robust income-tax compliance system can strengthen the NGO’s institutional credibility.

For organisations receiving CSR funding for environmental conservation, water conservation, biodiversity, disaster response, education or sustainable urban development, project-wise accounting becomes particularly important.

Each major grant should have an identifiable grant agreement, approved budget, bank trail, expenditure records, invoices, utilisation documentation and programme evidence. The organisation should be able to connect the money received with the charitable activity undertaken.

This is valuable not only for tax compliance but also for CSR due diligence and donor reporting.

Audit and Financial Records Under the New Framework

Tax exemption does not eliminate the need for professional accounting.

The Income-tax Rules, 2026 provide for audit reporting for registered non-profit organisations through the new framework, with the Income Tax Department mapping the earlier Forms 10B and 10BB to the corresponding audit framework.

An NGO should therefore maintain proper books of account, vouchers, bank statements, donor registers, grant records, fixed-asset registers, payroll documentation and project-wise expenditure records.

Internal controls should also be strengthened. Ideally, the person initiating a transaction should not be the same person who independently approves, records and authorises its payment. Regular bank reconciliation and review of grant balances should be mandatory.

For organisations managing multiple CSR and institutional projects, separate project codes or cost centres can make financial reporting substantially more reliable.

Digital Compliance and Governance

The new system is strongly integrated with the Income Tax Department’s electronic filing platform. Forms such as 104, 105, 108, 113 and 114 are increasingly handled electronically.

This provides an important benefit to NGOs. Digital filing creates greater traceability and reduces dependence on physical documentation.

However, digital compliance also increases the importance of data accuracy. A mistake in a donor PAN, donation amount or registration detail can be transmitted directly into the statutory system.

NGOs should therefore introduce a maker-checker system for important tax filings. Information should be prepared, independently reviewed and authorised before submission.

Income Tax Act 2025 NGO Compliance Checklist

Every NGO should consider the following during the transition:

• Review existing registration and approval under the Income Tax Act, 1961.
• Identify the corresponding provisions under the Income Tax Act, 2025.
• Review the trust deed, memorandum and charitable objects.
• Verify that actual activities remain consistent with approved objects.
• Review provisional or regular registration status.
• Track renewal and conversion requirements.
• Update the statutory compliance calendar.
• Review application of income against the 85% requirement.
• Maintain appropriate records for deemed application where relevant.
• Review accumulation of income and related documentation.
• Reconcile donations with bank statements and accounting records.
• Maintain complete donor information.
• Understand Form 113 and Form 114 requirements.
• Review audit requirements under the new Act and Rules.
• Maintain project-wise CSR and grant accounting.
• Maintain a fixed-asset register.
• Conduct regular bank reconciliations.
• Strengthen segregation of duties.
• Review digital filing access and authorised signatories.
• Obtain professional tax advice for complex transactions or transition issues.

How the Income Tax Act 2025 Can Benefit NGOs

The first major benefit is simplification. The new legislation reorganises the tax framework and introduces a more consolidated structure for registered non-profit organisations.

The second benefit is procedural clarity. The new registration and approval forms create a more standardised process. Form 104 deals with provisional registration or approval, while Form 105 addresses regular registration or approval in applicable circumstances.

The third benefit is continuity. Existing valid approvals and registrations do not automatically disappear with the commencement of the new Act. This is important for established NGOs with long operating histories.

The fourth benefit is better donor reporting. Forms 113 and 114 create a structured mechanism for reporting donations and issuing donor certificates.

The fifth benefit is stronger institutional governance. Digital filing and systematic reporting encourage NGOs to maintain better financial records.

The sixth benefit is greater donor and CSR confidence. An NGO that can demonstrate accurate statutory compliance, audited financial statements, proper grant utilisation and reliable donor reporting is better positioned to establish long-term relationships with CSR departments, philanthropic institutions and development partners.

Frequently Asked Questions

What is the Income Tax Act 2025 for NGOs?

The Income Tax Act, 2025 is India’s new direct-tax legislation that replaces the Income Tax Act, 1961 for the new tax framework from 1 April 2026. It contains a reorganised framework for registered non-profit organisations, including provisions relating to registration, application of income, accumulation, audit and donations.

Does the Income Tax Act 2025 replace the Income Tax Act 1961?

Yes, for the new tax framework beginning from 1 April 2026. However, transitional provisions continue to apply the earlier Act to certain earlier tax years, proceedings and applications. The Income Tax Department has clarified that eligible existing approvals continue subject to the transitional framework.

Will an existing NGO’s 12AB registration automatically become invalid?

No. The commencement of the new Act does not by itself invalidate an existing approval. The Income Tax Department has clarified that approvals and recognitions granted under the 1961 Act continue where they are not inconsistent with the corresponding provisions of the 2025 Act.

What is Form 104?

Form 104 is used for provisional registration or approval under the Income Tax Act, 2025 in applicable cases. It corresponds broadly to the earlier Form 10A framework.

What is Form 105?

Form 105 is the consolidated application used for regular registration or approval under the new framework in applicable cases. It can apply to organisations whose activities have commenced, whose provisional registration is approaching expiry, whose existing registration requires renewal or whose objects have been modified, subject to the applicable rules.

What are Forms 113 and 114?

Form 113 is the statement of donations received by an eligible registered non-profit organisation. Form 114 is the corresponding certificate of donation for the donor. These forms correspond broadly to Forms 10BD and 10BE under the earlier framework.

Does the 85% application principle continue?

Yes. Section 341 of the Income Tax Act, 2025 continues the 85% application framework for relevant regular income, subject to the detailed statutory conditions and rules.

Does 80G continue under the new Act?

The donor deduction framework continues but has been reorganised. Section 133 of the Income Tax Act, 2025 contains provisions dealing with deductions for eligible donations, while Section 354 deals with relevant approval and donation reporting for registered non-profit organisations.

What should NGOs do in 2026?

NGOs should map their existing registrations and approvals to the new law, review their objects and activities, update their compliance calendar, verify donor reporting systems, review application and accumulation of income, maintain proper accounts and ensure that applicable new forms are filed within the prescribed timelines.

Conclusion

The Income Tax Act, 2025 represents an important transition for India’s NGO and charitable sector. Its significance lies not only in replacing the Income Tax Act, 1961 but in creating a more consolidated framework for registered non-profit organisations and their financial and statutory compliance.

For NGOs, the transition should be approached as an institutional governance exercise rather than merely a tax-form exercise.

The key priorities are clear: maintain valid registration, operate within approved charitable objects, properly apply income, maintain transparent financial records, accurately report donations, comply with audit requirements and adopt the new digital forms and procedures.

For Drishti Foundation Trust, compliance is an integral part of responsible development practice. An organisation working with communities, donors, CSR partners and institutional stakeholders must be able to demonstrate not only the impact of its programmes but also the integrity of its financial systems.

The new framework can therefore be viewed as an opportunity. NGOs that strengthen their accounting systems, donor databases, internal controls, statutory calendars and governance practices will be better prepared to access CSR funding, institutional grants and philanthropic support.

The transition from the Income Tax Act, 1961 to the Income Tax Act, 2025 should ultimately result in a more transparent, accountable and professionally governed non-profit sector.

For Indian NGOs, the message is straightforward: understand the new law, map your existing compliance, update your systems and maintain complete documentation throughout the tax year.

About Drishti Foundation Trust

Drishti Foundation Trust is a research and development organisation working in areas including environment, water conservation, biodiversity, disaster response, education and sustainable development. The organisation has undertaken initiatives with communities, institutions, government stakeholders and corporate partners and has experience in implementing development-oriented programmes in India.

Disclaimer

This article is intended for general educational and NGO compliance awareness purposes and should not be treated as legal or tax advice. The tax treatment of an NGO depends on its legal structure, registration status, objects, activities, sources of income, donations, investments, expenditure and individual circumstances. Organisations should consult a qualified Chartered Accountant or tax professional before taking a specific tax position or filing a statutory form. The Income Tax Act, 2025, Income-tax Rules, 2026, CBDT notifications, circulars and official Income Tax Department guidance should be consulted for the latest applicable requirements.

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