RNPOs Under Income-tax Act 2025: What NGOs Must Know

If your organization is a charitable trust, registered society, NGO or Section 8 company, there's an important tax change you should be aware of.

The Income-tax Act, 2025, which came into effect on 1 April 2026, replaces the Income-tax Act, 1961 and introduces a new unified framework for non-profit organizations called Registered Non-Profit Organizations (RNPOs). The RNPO provisions are consolidated into Part B of Chapter XVII (Sections 332–355) of the new Act.

While most of the existing tax benefits continue, the new law reorganizes how non-profit organizations are registered, taxed and regulated. Under the 1961 Act, these rules were scattered across many separate sections — 2(15), 10(23C), 11, 12, 12A, 12AA, 12AB, 13, 80G, and more — which created overlap and confusion. The 2025 Act brings all of it under one chapter, cutting the provisions from roughly 12,800 words to about 7,600.

Here's a look at the major changes and what they mean for your organization.

What Is an RNPO?

RNPO stands for Registered Non-Profit Organization. Under Section 355(g), it's any entity holding a valid, uncancelled registration or approval under a "specified provision" — which includes Sections 12A, 12AA, 12AB and 10(23C) of the old Act, and Section 332 of the new Act.

The law continues to recognize organizations established for charitable or religious purposes, including:

• Public Charitable Trusts
• Registered Societies
• Section 8 Companies
• Government-funded charitable institutions
• Other eligible non-profit organizations

The definition of "charitable purpose" has moved from Section 2(15) to Section 2(23) but remains substantially unchanged. It continues to include:

• Relief of the poor
• Education
• Yoga
• Medical relief
• Preservation of the environment
• Preservation of monuments or places of historical or artistic importance
• Advancement of any other object of general public utility

Do Existing NGOs Need to Register Again?

No, not immediately.

Organizations with a valid registration under Sections 12A, 12AA or 12AB, or approval under Section 10(23C), are automatically treated as RNPOs from 1 April 2026, for the remaining validity period of their existing registration. There's no need to re-register simply because the new Act has come into force.

That said, this transition isn't indefinite — here's the timeline you actually need to track:

• Provisional registration is valid for 3 years.
• Regular registration is valid for 5 years — or 10 years for smaller organizations whose total income didn't exceed ₹5 crore in each of the two preceding tax years.
• When your existing registration or approval is due to expire, you must file Form 105 (the successor to old Form 10AB) for renewal at least 6 months before the expiry date. Missing this window can interrupt your exemption status, so it's worth calendaring now rather than waiting for the reminder.

How Has the Taxation of NGOs Changed?

One of the biggest structural changes is how income is classified. Instead of a single pass/fail exemption test, the Income-tax Act, 2025 sorts an RNPO's income into three buckets under Sections 334–336, and the tax treatment depends on which bucket it falls into.

1. Regular Income

This is income earned in the normal course of charitable activity, including:

• Voluntary contributions
• Income from property or investments held under trust
• Income from charitable or religious activities
• Incidental business income (from permitted commercial activity — see below)
• Other eligible receipts

The familiar rule requiring at least 85% of this income to be applied or accumulated for charitable or religious purposes continues under the new Act. Meet the conditions, and this income stays exempt.

2. Specified Income

Certain types of income are taxed at a flat 30%, regardless of the org's normal exemption status. These include:

• Anonymous donations
• Benefits provided to specified related persons
• Income applied outside India without the necessary approval
• Investments made in violation of the prescribed investment rules (Section 350)
• Accumulated income applied for a purpose other than accumulation, or not utilized/paid out as required
• Income applied for a purpose other than the charitable object
• Income determined by the Assessing Officer in excess of what's shown in the books

Proper accounting and documentation matter more than ever here — misclassification can turn otherwise-exempt income into taxable income.

3. Residual Income

Anything that doesn't fall into Regular or Specified Income is Residual Income, taxed at the normal applicable rate.

Restrictions on Commercial Activity — A Compliance Trap to Watch

This is an area many NGOs overlook. An RNPO generally cannot carry on commercial activities except those incidental to its charitable purpose. Carrying on non-incidental commercial activity can jeopardize RNPO status entirely.

There's one specific carve-out: organizations operating under the "advancement of any other object of general public utility" head (Section 346) may carry on commercial activity, but only if it doesn't exceed 20% of total receipts, and only if separate books of account are maintained for that activity. If your organization runs fee-based training, consulting, product sales, or similar income-generating programs alongside its charitable work, this 20% threshold is worth reviewing with your accountant now — exceeding it isn't just a tax issue, it can put your registration itself at risk.

Has the 85% Application Rule Changed?

The basic principle remains the same — at least 85% of regular income must be applied toward charitable or religious objects. The new Act does add some clarity:

• Donations made to another RNPO can count as application of income, subject to prescribed conditions (generally within the 85% threshold).
• Certain loan repayments and corpus-related adjustments are recognized in specified cases, including corpus funds reinvested within five years.
• Where the required 85% can't be applied in a given year for permitted reasons, deemed application is still allowed if the shortfall is spent in the current or following tax year, subject to compliance.

What About 80G?

Section 80G hasn't disappeared — it's been renumbered. The approval mechanism that lets donors claim tax deductions on their contributions now sits under Section 354 of the new Act.

This means RNPO status alone doesn't automatically entitle your donors to tax deductions — you still need to hold and maintain the separate approval under Section 354 for that.

New Compliance Requirements

Beyond registration and taxation, the Act introduces a more structured compliance framework covering:

• Commercial activities carried out by non-profit organizations
• Maintenance of books of account
• Permissible modes of investment
• Audit and reporting requirements
• Consequences of specified violations
• Cancellation of registration in certain cases

Much of this mirrors the earlier law, but it's worth reviewing your internal processes against the new framework rather than assuming continuity.

Updated Forms Under the Income-tax Rules, 2026

Use the applicable new form for all future applications and statutory filings — the old form numbers are no longer valid for filings made on or after 1 April 2026.

What Should NGOs Do Now?

Although existing organizations don't need immediate fresh registration, this is a good time to review your compliance framework:

• Note the expiry date of your existing registration/approval and calendar the 6-month-prior deadline for filing Form 105.
• Check whether your Section 354 (80G-equivalent) approval is in place, if you want donors to claim deductions.
• Review any commercial/fee-based activities against the 20% receipts cap under Section 346, if applicable.
• Ensure your accounting system correctly classifies income into Regular, Specified, and Residual categories.
• Review investments to confirm compliance with Section 350.
• Familiarize your finance and compliance teams with the revised forms (104, 105, 106, 107, 112, 113, 114) and reporting requirements.
• Strengthen documentation for donations, application of income, and related-party transactions.

Being proactive now can help you avoid compliance issues once your existing registration comes up for renewal.

Final Thoughts

The RNPO framework is one of the most significant reforms affecting India's non-profit sector in recent years. While it largely preserves the tax benefits available to genuine charitable organizations, it places greater emphasis on proper governance, transparent reporting, and accurate compliance — and it introduces real deadlines (the 6-month renewal window, the 20% commercial activity cap) that weren't as sharply defined before.

For most NGOs, trusts and Section 8 companies, the transition should be smooth. But understanding the new framework and reviewing your compliance processes now — rather than at renewal time — is what keeps your tax exemption uninterrupted.

If your organization needs assistance with RNPO registration, donor approval, tax compliance or annual filings under the Income-tax Act, 2025, talk to our team — we help NGOs navigate the transition without losing exemption status along the way.

Disclaimer: Tax law and compliance thresholds are subject to CBDT clarifications and rule amendments. Please verify current provisions before relying on this article for a specific filing decision.