Section 355 — Chapter XVII Interpretation | ITA 2025

Section 355 — - INTERPRETATION

Section 355 is the DEFINITIONAL ANCHOR for Chapter XVII Special Provisions relating to charitable trusts / NPOs (ss. 332-355) and related provisions. The provision defines critical terms used throughout the chapter: 'charitable purpose' / 'general public utility' / 'business / commercial activity' / 'religious purposes' / 'specified person' / 'corpus' / 'accumulated income' / 'application of income' / 'permitted modes of investment' / 'trust property' / various other operational terms. The interpretation drives substantive application of the entire trust regime. Critical for: (a) compliance interpretation; (b) AO scrutiny; (c) appellate strategy; (d) restructuring decisions.

Statutory text — Income-tax Act, 2025

Marginal note -- Interpretation

For the purposes of this Part,—

(a) “anonymous donation” means any voluntary contribution referred to in section 2(49)(c), where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars, as may be prescribed;

(b) “approval” means an approval under the second proviso to section 80G(5) of the Income-tax Act, 1961 (43 of 1961) or section 354;

(c) “cancellation” includes withdrawal;

(d) “donation” means any voluntary contribution received by a registered non-profit organisation from any person;

69. Inserted by the Finance Act, 2026, w.e.f. 1-4-2026.

(e) “commercial activity” means any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other considera- tion, irrespective of the nature of use or application, or retention, of the income from such activity;

(f) “registration” includes provisional registration, provisional approval or approval, as referred to in the second proviso to section 10(23C) or 12AB(1) of the Income-tax Act, 1961 (43 of 1961) and under section 332, but shall not include approval under the second proviso to section 80G(5) of the said Act or section 354;

(g) “registered non-profit organisation” means any person having a valid registration under any specified provision and such registration has not been cancelled;

(h) “related person” means any of the following persons:—

(i) the author or the founder of the registered non-profit organisa- tion;

(ii) any person whose total contribution to such registered non-profit organisation, during the relevant tax year exceeds ` 100000, or, in aggregate up to the end of the relevant tax year exceeds ten lakh rupees, as the case may be;

(iii) where such author, founder or person is a Hindu undivided family, a member of the family;

(iv) any trustee or manager (by whatever name called) of the registered non-profit organisation;

(v) any relative of any persons referred to in sub-clause (i), (iii) or (iv);

(vi) any concern in which any of the persons referred to in sub-clause (i), (iii), (iv) or (v) has a substantial interest;

(i) “relative”, in relation to an individual, means—

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) any lineal ascendant (maternal or paternal) or descendant of the individual;

(v) any lineal ascendant (maternal or paternal) or descendant of the spouse of the individual;

(vi) spouse of a person referred to in sub-clause (ii), (iii), (iv) or (v);

(vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual;

(j) “residual income” means the total income without giving effect to the provisions of this Part, as reduced by regular income and specified income;

(k) “specified asset” means any asset which is established to have been directly acquired by the specified person—

(i) out of its income of the nature referred to in Schedule II (Table: Sl. No. 1);

(ii) during the period beginning from the date of its creation or estab- lishment and ending on the date from which the registration under specified provision became effective, if the specified person has not been allowed any benefit under this Part or under sections 11 and 12 or section 10(23C)(iv) or (v) or (vi) or (via) of the Income-tax Act, 1961 (43 of 1961) during the said period, where provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C) of the said Act, are not applicable;

(iii) during the period beginning from the date of its creation or estab- lishment and ending on the date from which the registration under specified provision became effective due to the provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), where provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), of the Income-tax Act, 1961 (43 of 1961), are applicable; and

(iv) which has been transferred to any other specified person within twelve months from the end of the month in which the dissolution takes place in respect of a case specified in section 352(4) (Table:

Sl. No. 9);

(l) “specified person” means any person which is registered under any specified provision at any time since its incorporation or creation;

(m) “specified provision” means section 12A, 12AA or 12AB or section 10(23C) of the Income-tax Act, 1961 (43 of 1961) or section 332;

(n) “substantial interest”, in relation to a person in a concern, means—

(i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than 20% of the voting power are, at any time during the tax year, owned beneficially by such person or partly by such person and partly by one or more of the other related persons; or

(ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other related persons are entitled in the aggregate at any time during the tax year, to not less than 20% of the profits of such concern;

(o) “value” means the value of any benefit or facility granted or provided free of cost or at concessional rate to any related person;

(p) “wholly for charitable or religious purposes” shall mean wholly for char- itable purposes or wholly for religious purposes or wholly for charitable and religious purposes.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 355	INCOME-TAX ACT, 1961
Charitable trust / NPO definitions	1961 s. 2(15) / 11 / 12 / 12A / 12AB / 80G Explanations
Charitable purpose definition	1961 s. 2(15)
Specified person / sub-categories	1961 s. 13 / various Explanations
Business / commercial activity test	1961 s. 2(15) Proviso / s. 11(4A) / 13
Corpus / accumulated income / application	1961 s. 11 Explanations

STATUTORY ARCHITECTURE

KEY DEFINITIONS: (I) CHARITABLE PURPOSE: (a) Relief of poor; (b) Education; (c) Yoga; (d) Medical relief; (e) Preservation of environment / monuments / places of artistic / historic interest; (f) ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY (subject to commercial-activity test in sub-s. (15) Proviso). (II) GENERAL PUBLIC UTILITY: residual category; subject to (a) PRIMARY OBJECT being charitable; (b) commercial-activity-receipts < 20% of gross receipts (FA 2015 Proviso to s. 2(15)). (III) BUSINESS / COMMERCIAL ACTIVITY: incidental commercial activity preserved; principal commercial activity disqualifies trust from charitable status. (IV) RELIGIOUS PURPOSES: religious activities recognised; mixed-charitable-religious have specific carve-outs post FA 2022. (V) SPECIFIED PERSON: per s. 13 / s. 353 -- author / settlor / trustee / family / etc. who cannot benefit personally from trust funds. (VI) CORPUS: voluntary contributions specifically designated as corpus (not regular income). (VII) ACCUMULATED INCOME: income accumulated under s. 342 / 1961 s. 11(2) per Form 10 declaration with specified purposes. (VIII) APPLICATION OF INCOME: per s. 341 / 1961 s. 11(1) -- 85% application test. (IX) PERMITTED MODES OF INVESTMENT: per s. 350 / 1961 s. 11(5) -- specified bank deposits / Government securities / etc. (X) TRUST PROPERTY: assets held by trust; subject to s. 13 personal-benefit prohibition.

PRACTITIONER NOTES

(i) CHARITABLE PURPOSE PRECISION -- trust deed must specify charitable purpose precisely; ambiguity invites scrutiny. (ii) GENERAL PUBLIC UTILITY -- post-FA 2015, commercial-activity threshold (20%) tightly enforced. (iii) RELIGIOUS-CHARITABLE -- post-FA 2022 stricter; review structure if mixed. (iv) SPECIFIED PERSON RESTRICTIONS -- s. 13 violations trigger s. 351 cancellation. (v) CORPUS ACCOUNTING -- maintain separate corpus account; document each corpus contribution. (vi) FORM 10 ACCUMULATION -- specific purposes; 5-year application window.

CROSS-REFERENCES

Section 332 -- Trust registration.
Section 334 -- Tax on registered NPO income.
Sections 335-352 -- Trust regime detailed framework.
Section 353 -- Other violations.
Section 354 -- 80G approval.
Section 13 / 1961 -- Personal-benefit prohibition.

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