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The Income-tax Act 2025 simplifies the tax structure for Registered Non-Profit Organisations (RNPOs) but inadvertently introduces three critical drafting anomalies. First, corpus donations excluded from "regular income" might fall into the taxable "residual income" basket, potentially losing their historical tax exemption. Second, income applied towards non-registered purposes risks double taxation, as it is disallowed as a deduction from regular income while simultaneously being taxed as specified income. Finally, the omission of a clause enforcing "additional income-tax" on accreted income when normal tax is zero could render the levy unenforceable. Legislative clarifications are urgently needed.
The provisions relating to charitable institutions (now rechristened as Registered Non-Profit Organisations -RNPOs), have undergone significant structural revamp in the Income-tax Act, 2025 ("2025 Act"). Consolidation of scattered provisions of the Income-tax Act, 1961 in one single chapter XVII-B, arrangement of sections in a logical sequence and expression of law in a simpler language-these changes are undoubtedly welcome and make the law easier to navigate.
At the same time, the extensive restructuring appears to have introduced certain serious structural anomalies and drafting gaps which may have unintended tax consequences for a large number of RNPOs. Some provisions seem
