Reforming Taxation for NPOs: What Clause 337 Means for You
Clause 337 of the Income Tax Bill, 2025 proposes a major shift in how “specified incomes” of Non-Profit Organisations (NPOs) are taxed. It modifies the existing Section 115BBI of the Income-tax Act, 1961 to streamline compliance, ensure transparency, and curb misuse.
Let’s break it down clearly for Indian trusts, societies, and institutions impacted by this change.
What is “Specified Income” in NPO Taxation?
As per Section 115BBI, the following were taxed at 30% flat:
- Anonymous donations (Section 115BBC)
- Commercial receipts beyond exemption limits
- Non-compliant or non-applied income under Sections 10(23C), 11 or 12
What’s New in Clause 337 of the 2025 Bill?
Clause 337 tweaks the structure while preserving the core tax rate.
Key reforms:
- Uniform tax base: Applies to both registered and provisionally registered NPOs
- Better classification: Separates compliant vs. non-compliant incomes
- Updated scope: Covers misuse of exemption under charitable purposes
- Clarified taxation timing: Income taxed in the year of contravention, not deferred
Comparison Table: Old vs. New Law
| Aspect | Section 115BBI (Old) | Clause 337 (New) |
|---|---|---|
| Applicability | All charitable institutions | Registered & provisionally registered |
| Rate | 30% | 30% |
| Scope | Anonymous donations, misused income | Same + enhanced clarity |
| Timing | Could be deferred | Taxed in year of misuse |
| Intention | Plug misuse | Improve transparency |
Legal Reference
- Section 115BBI, Income-tax Act, 1961
- Draft Income Tax Bill, 2025 – Clause 337
- CBDT FAQs on NPO Taxation (if available)
Expert View
“NPOs must ensure documentation and timely compliance. Even provisional registration doesn’t protect against 30% tax on misuse.”
How to Stay Compliant as an NPO
✅ Keep detailed books of accounts
✅ Track donations, especially anonymous ones
✅ Avoid application delays under Sections 11 & 12
✅ Stay updated on exemption conditions under 10(23C)
Internal Compliance Tip
If your trust is provisionally registered, ensure you transition to full registration under new Form 10AB rules within the prescribed timeline.
FAQs
Q1. Will Clause 337 increase the tax rate for NPOs?
No. The 30% rate remains, but clarity and enforcement are tighter.
Q2. Does this apply to religious trusts too?
Yes, if they fall under the exempted category and fail to comply.
Q3. Can anonymous donations still be accepted?
Yes, but only within limits. Excess will be taxed under Section 115BBC.
Conclusion
Clause 337 doesn’t increase your burden—it clarifies it. But miss a step, and you’ll lose exemption. Let Efiletax help you stay compliant, avoid penalties, and file returns the right way.
Clause 337 of the Income Tax Bill 2025 reforms how NPOs are taxed on misused or non-applied income. It strengthens enforcement under Section 115BBI while maintaining the 30% flat rate. Here’s what Indian trusts and institutions must know to stay compliant