[Opinion] No Policy Changes in Trust Taxation | Old Income Tax Law v/s New Income Tax Law

CA Naresh Kumar Kabra & Asmi Jain – [2025] 181 taxmann.com 476 (Article)

1. Introduction

The Income-tax Act, 2025 is a modern and comprehensive revision of the 60-year-old Income-tax Act, 1961. It aims to make India’s direct tax system simpler, clearer, and more in line with current needs.

This article will discuss key reforms in the taxation of charitable trusts, including the introduction of a new category called Registered Non-Profit Organisation (NPO). This change combines the previous categories like trusts, societies, Section 8 companies, and other similar institutions, with all related rules now brought together for easier understanding and compliance.

Overall, the Act reduces redundancy, streamlines administration, and makes tax rules more accessible to both taxpayers and authorities. The Income Tax Act, 2025 will be applicable from the tax year 2026–27 (i.e., 1 April 2026).

2. Definition of Registered Non-Profit Organisation

Under the Income Tax Act, 2025, a single consolidated term “Registered Non-Profit Organisation” (Registered NPO) has been introduced to encompass a wide range of entities such as public trusts, societies, Section 8 companies, universities and other government-recognised educational institutions.

Section 355(g) of the Act of 2025 states that

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

Now the question arises what is the meaning of a valid registration?, which is explained in Section 355(f) which states that

“”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 and under section 332, but shall not include approval under the second proviso to section 80G(5) of the said Act or section 354”.

Thus, “Registered NPO” refers to any entity holding a valid registration under these specified provisions, as long as the registration has not been cancelled.

3. Comparative Analysis of Changes Proposed by the Income Tax Bill, 2025 Vs The Income Tax Act, 2025

The table below presents a comparative overview of the proposed changes in the Income Tax Bill, 2025, highlighting the differences from the old Act and outlining the implementation status of these changes in the new Act:

S. No.	Particulars	Section as per Income Tax Act,1961	Proposed in Income Tax Bill,2025	Section as per Income Tax Act, 2025
1.	Deemed application	Section 11(1) explanation (1) and (2)	Proposed to be omitted.	Section 341(5),(6) ,(7),(8)
2.	Capital Gain	11(1A)	Proposed to be omitted.	341(9),(10)
3.	Taxation of Deemed Application	11(1B)	Proposed to be omitted.	337, S. No. 13 of the Table
4.	Registration 10(23C)	10(23C)(iv),(v), (vi), (via)	Proposed to be omitted.	Omitted

As shown in the table above, of the four provisions initially proposed for omission, three were reinstated in the Act of 2025, and only section 10(23C)(iv),(v),(vi) and (via) were ultimately omitted.