The Central Board of Direct Taxes (CBDT) has notified the Income-tax (Eighth Amendment) Rules, 2026, introducing specific conditions for the merger of registered non-profit organisations (NPOs) having the same or similar objectives. The notification, dated October 30, 2026, inserts a new Rule 189A into the Income-tax Rules, 2026, along with a new Form 112A for reporting such mergers.
The amendment is particularly relevant for charitable trusts and other registered non-profit organisations considering consolidation or restructuring, as it lays down conditions relating to registration status, outstanding tax demands, transfer of assets and liabilities, utilisation of income and post-merger compliance.
CBDT Introduces Rule 189A for Merger of Registered NPOs
Under the newly inserted Rule 189A, a registered non-profit organisation can merge with another registered NPO only if both organisations have the same or similar objectives and comply with the prescribed conditions.
One important restriction concerns the registration status of the organisations. An NPO registered under Section 332 cannot merge with an NPO holding provisional registration under the same section. Similarly, a provisionally registered organisation cannot merge with an organisation having regular registration.
The rule also addresses outstanding tax demands. The merging organisation should not have any unpaid tax, interest, penalty, fine or other demand arising from an order under the Income-tax Act, 2025, unless the demand is under appeal before an appellate authority. Where an appeal is pending, the surviving organisation will be responsible for paying the outstanding demand once the appeal reaches finality.
Five-Year Restriction on Changes in Objectives
The new rules introduce an important safeguard concerning the objectives of the surviving organisation.
The objectives of the merged registered NPO cannot be amended within five years from the end of the financial year in which the merger takes place.
This condition is intended to ensure that the merger does not result in a change in the fundamental charitable or non-profit purpose of the surviving organisation shortly after consolidation.
Transfer of Assets, Liabilities and Tax Obligations
Another significant requirement is that all assets and liabilities of the merging organisation will become the assets and liabilities of the surviving organisation from the effective date of the merger.
The surviving organisation will also take over the compliance responsibilities of the merging entity, including:
- Application of income: Income of the merging organisation must be applied by the surviving organisation in accordance with Section 341.
- Accumulated income: The application of accumulated income must comply with Section 342.
- Specified income: The surviving organisation will be liable to pay tax under Section 334 in respect of the specified income of the merging organisation.
- Compliance conditions: The surviving organisation must ensure that the conditions prescribed under Section 340 are not violated.
- Investment of funds: Funds must be invested in the modes specified under Section 350.
- Additional income tax: Any additional income-tax liability arising under Section 352 must be discharged by the surviving organisation.
The rules also clarify that the merger must not result in any direct or indirect benefit to related persons covered under Section 337(1).
New Form 112A Introduced for Reporting NPO Mergers
To formalise the reporting process, CBDT has introduced Form No. 112A, which must be submitted electronically by the surviving registered non-profit organisation.
The form must be filed with the jurisdictional Principal Commissioner or Commissioner within one month from the end of the month in which the merger becomes effective.
It can be furnished electronically using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).
Form 112A requires details of both organisations, including:
- Name and address of the merging and merged organisations.
- Permanent Account Number (PAN).
- Email ID and contact number.
- Effective date of merger.
- Other supporting information through separate annexures.
The form also contains a declaration by the surviving organisation confirming compliance with the prescribed merger conditions.
Documents Required Along with Form 112A
The notification specifies five supporting annexures to be furnished with the form:
- Annexure A-1: Copies of the trust deeds of both organisations.
- Annexure A-2: Copies of registration certificates granted to both organisations.
- Annexure A-3: Copy of the resolution passed by the trustees, governing body or management approving the merger.
- Annexure A-4: Audited books of accounts of both organisations as on the merger date, along with audited accounts for the financial year immediately preceding the tax year in which the merger takes place.
- Annexure A-5: Reasons for undertaking the merger.
The notification further provides that certain information in Form 112A will be pre-filled to the extent possible.
Assessment and Audit Responsibilities After Merger
The amendment also addresses how pending and future tax proceedings will be handled following a merger.
Where assessment, reassessment or any other proceedings have already been made or initiated against the merging organisation, they will be treated as proceedings against the surviving organisation.
In other cases, assessments and other proceedings relating to the tax year in which the merger takes place, up to the merger date, and preceding tax years will be carried out against the surviving organisation in the same manner and to the same extent as they would have been against the merging organisation.
Additionally, both the merging and surviving registered NPOs must get their books of accounts audited by an accountant as defined under Section 515(3)(b), as on the date of merger.
Restriction on Double Depreciation Claims
Form 112A also includes an important declaration concerning depreciation.
Where the merging organisation has already claimed the cost of acquisition of an asset as application of income, the surviving organisation cannot claim depreciation on that asset.
This condition is important for organisations transferring substantial assets as part of a merger, as it prevents a duplicate tax benefit in respect of the same asset.
Effective Date of the New Rules
The Income-tax (Eighth Amendment) Rules, 2026, were notified through Notification No. 139/2026, G.S.R. 961(E), dated October 30, 2026.
The rules come into force from the date of their publication in the Official Gazette.
The amendment provides a formal compliance framework for mergers between registered non-profit organisations under the Income-tax Act, 2025. Organisations planning such mergers should carefully examine their registration status, outstanding tax liabilities, accumulated income, asset transfers and documentation requirements before proceeding.
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