Section 12AC — Merger of Charitable Trusts or Institutions in Certain Cases

Function in the statutory architecture

Section 12AC covers a trust or institution registered under s. 12AB, or approved under sub-clause (iv), (v), (vi) or (via) of s. 10(23C), which merges with another trust or institution. On such a merger, the provisions of Chapter XII-EB, which levy tax on the accreted income of a trust or institution, do not apply.

Three conditions must all be met: the other trust or institution has the same or similar objects; it is itself registered under s. 12AA or s. 12AB or approved under one of the s. 10(23C) sub-clauses; and the merger fulfils the conditions prescribed in the rules.

Operative consequences

• A qualifying merger does not attract tax on accreted income under Chapter XII-EB.
• A merger that fails any of the three conditions falls outside the section, so Chapter XII-EB can apply to it.
• The 2025 Act repeats the rule in s. 354A by switching off s. 352 for mergers between registered non-profit organisations with same or similar objects that meet prescribed conditions.

Status

The section is operative for AY 2026-27. Its footnote records: “Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025.” The Finance Act, 2026 does not amend this section. The corresponding s. 354A of the 2025 Act carries the note “Inserted by the Finance Act, 2026, w.e.f. 1-4-2026”.

The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the 2025 Act provision is s. 354A.