Income Tax 2025

Appearance

Switching over of regimes. ​

333(1) ​

Nothing contained in section 11, other than Schedule II (Table: Sl. No. 1), Schedule III (Table: Sl. Nos. 27 to 29 and 36) and Schedule VII (Table: Sl. Nos. 10 to 19 and 42 to 45), shall exclude any income of a registered non-profit organisation from its total income for any tax year.

333(2) ​

The registration under section 332 shall cease to operate from the date on which the registered non-profit organisation is notified as specified in Schedule III (Table: Sl. No. 27, 28, 29 or 36) or Schedule VII (Table: Sl. No. 42), or from the 1st day of April of the tax year for a registered non-profit organisation which claims exemption under Schedule VII (Table: Sl. No. 43, 44 or 45).

333(3) ​

A person, whose registration ceases to operate under sub-section (2), may apply for registration under section 332 subject to the condition that the notification granting exemption to such person under Schedule III (Table: Sl. No. 27, 28, 29 or 36) or Schedule VII (Table: Sl. No. 42) ceases to have effect from the date on which the said registration is granted and thereafter shall not be entitled to exemption under the respective serial numbers of the said Schedules

Explanation

Section Summary: ​

This section deals with the rules for switching tax regimes for registered non-profit organizations (NPOs) in India. It specifies when and how an NPO's income will no longer be excluded from its total income for tax purposes, and the conditions under which its registration under Section 332 ceases to operate. It also outlines the process for re-applying for registration if the NPO loses its exemption status.

Key Changes: ​

  1. Narrowed Exemptions: The section limits the income exclusions for NPOs to specific provisions in Schedules II, III, and VII. Any income not covered under these specific provisions will now be included in the NPO's total income for tax purposes.
  2. Cessation of Registration: The registration of an NPO under Section 332 will cease if it is notified under specific entries in Schedule III or VII, or if it claims exemption under certain entries in Schedule VII.
  3. Re-application for Registration: NPOs whose registration ceases can re-apply for registration under Section 332, but they will lose their previous exemption status under the specified schedules.

Practical Implications: ​

  1. For NPOs:
    • NPOs must carefully review their income sources to determine if they fall under the specified schedules for exemption. If not, such income will now be taxable.
    • If an NPO loses its registration due to notification under specific schedules, it must re-apply for registration under Section 332 to regain tax-exempt status.
  2. For Tax Authorities:
    • This section provides clarity on when an NPO's tax-exempt status ceases and ensures stricter compliance with the conditions for exemptions.

Critical Concepts: ​

  1. Registered Non-Profit Organisation (NPO): An entity registered under Section 332, eligible for tax exemptions under specific schedules.
  2. Schedules II, III, and VII: These schedules list specific types of income or activities that qualify for tax exemptions. The section limits exemptions to only those listed in the specified serial numbers.
  3. Cessation of Registration: The process by which an NPO loses its tax-exempt status due to non-compliance or notification under specific schedules.

Compliance Steps: ​

  1. Review Income Sources: NPOs must ensure their income qualifies under the specified serial numbers in Schedules II, III, and VII to avoid taxation.
  2. Monitor Notifications: NPOs must stay updated on any notifications under Schedule III or VII that could affect their registration status.
  3. Re-apply for Registration: If an NPO's registration ceases, it must apply for re-registration under Section 332 to regain tax-exempt status.

Examples: ​

  1. Scenario 1: An NPO receives income from a source not listed in the specified serial numbers of Schedules II, III, or VII. This income will now be included in its total income and taxed accordingly.
  2. Scenario 2: An NPO is notified under Schedule III (Sl. No. 27). Its registration under Section 332 ceases, and it must re-apply for registration to regain tax-exempt status. Once re-registered, it will no longer be eligible for exemptions under Schedule III (Sl. No. 27).

This section ensures stricter compliance for NPOs and clarifies the conditions under which their tax-exempt status can be revoked or reinstated.