Quick Summary
The Finance Bill, 2026 has proposed a significant amendment to the taxation framework governing mergers of non-profit organisations (NPOs), aiming to align the new NPO regime with the erstwhile provisions applicable under section 12AC of the Income-tax Act, 1961. Background: Existing Provision Under Section 352(4) Under the existing provisions of section 352(4) of the Income-tax Act, tax on accreted income becomes payable by a specified person where a registered non-profit organisation merges
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FAQ :
A new Section 354A is being introduced to exempt accreted income tax when a registered NPO merges with another registered NPO that has the same or similar objects, from April 2026.
These amendments will come into force from 1st April 2026 and will apply from the Tax Year 2026-27 onwards.
The previous rules did not explicitly cover mergers between registered NPOs with the same or similar objects, creating ambiguity around the taxability of accreted income in such cases.
No, the exemption applies only if the merging NPOs are registered, have the same or similar objects, and fulfil any other prescribed conditions.
NPOs should carefully check if their objects are identical or substantially similar, ensure compliance with the new Section 354A conditions, and review their merger documentation to avoid unintended tax implications.
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