The Finance Bill, 2026 has proposed an important clarification in the registration framework for non-profit organisations (NPOs) by amending Section 332(1)(f) of the Income-tax Act, 2025. The amendment seeks to remove specific funds from the requirement of mandatory registration, aligning the new NPO regime with the earlier provisions of the Income-tax Act, 1961.
Existing Provision Under Section 332
Section 332 of the Income-tax Act, 2025 specifies the categories of persons who are required to apply for registration as a registered non-profit organisation in order to avail tax exemptions.
Clause (f) of sub-section (1) currently includes persons listed in Schedule VII (Table: Sl. No. 10 to Sl. No. 16) within the scope of entities eligible and consequently required, to seek registration under the new Act.
These entities were earlier enjoying exemption under section 10 of the Income-tax Act, 1961 and were not required to obtain separate registration to claim such exemption.
Rationale for the Amendment
The continuation of these persons within section 332(1)(f) created uncertainty as to whether they were now required to seek registration under the Income-tax Act, 2025, despite having been exempt from such procedural requirements under the earlier law.
To remove this ambiguity and ensure consistency with the Income-tax Act, 1961, the Finance Bill, 2026 proposes to delete the reference to these persons from section 332(1)(f).
Impact of the Proposed Amendment
Once the amendment comes into effect:
- Persons referred to in Schedule VII (Table: Sl. No. 10 to 16) will not be required to register under section 332 of the Income-tax Act, 2025
- Their exemption status will continue without undergoing the NPO registration process
- Compliance burden for specified funds and institutions will be significantly reduced
This amendment reinforces the intent of the law to avoid unnecessary duplication of compliance for entities that were historically exempt from registration.
Effective Date
The amendment will take effect from 1 April 2026 and will apply to Tax Year 2026-27 and all subsequent tax years.
Key Takeaway
Funds and institutions that were previously exempt from registration under the Income-tax Act, 1961 will continue to enjoy similar treatment under the Income-tax Act, 2025. The amendment provides long-awaited clarity and ensures a smoother transition to the new NPO taxation regime.
Official copy of the Clause is as follows
Amendment of section 332(1)(f) of the Income-tax Act, 2025 to remove certain funds from the requirement of registration
Section 332 inter alia specifies the persons who may apply for registration as a registered non-profit organisation. The aforesaid provision also includes the persons referred to in Schedule VII (Table: Sl. No. 10) to (Table: Sl. No. 16), who were not required to register themselves under the Income-tax Act, 1961 to claim benefit of exemption under section 10 of the Income-tax Act, 1961.
In order to align the said provision with the Income-tax Act, 1961 and provide clarity it is proposed to remove the reference of aforesaid persons from section 332(1)(f) of the Income-tax Act, 2025, so that such person shall not be required to registered themselves under section 332 of the Act.
These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply to the tax year 2026-27 and subsequent tax years.
[Clause 66]
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