Rule 182 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 182 of the Income-tax Rules, 2026 computes a non-profit organisation's permissible commercial activity as a separate entity with separate books; rule 183 lists ten circumstances in which income counts as applied for a related person's benefit; rule 186 puts a change of accumulation purpose in Form No. 110.
Rule 182 — ring-fencing the commercial activity
For the purposes of section 335(e), the gains of any commercial activity permissible under sections 344, 345 and 346, carried out by a registered non-profit organisation for a tax year, are computed as follows:
- (a) the commercial activity is treated as if it is an entity separate from the registered non-profit organisation;
- (b) separate books of accounts are maintained for such activities; and
- (c) the gains for the tax year are computed as per the provisions of Part D of Chapter IV of the Act.
Clause (b) of rule 182 is not a computational assumption — it is an accounting requirement. Separate books must actually be maintained for the permissible commercial activity, contemporaneously, not reconstructed at the year end from a single set of records. Clause (a) then treats that activity as a separate entity, and clause (c) computes its gains under Part D of Chapter IV — the ordinary business income provisions, with their deductions, disallowances and depreciation. A registered non-profit organisation running a permissible commercial activity is therefore, for this purpose, keeping a second set of business accounts alongside its own. That decision has to be taken when the activity starts.
Note the scope. Rule 182 applies to activity that is permissible under sections 344, 345 and 346. An activity outside those sections is not made permissible by keeping separate books, and the rule does not reach it.
Rule 183 — the ten circumstances
For section 337 , income applied directly or indirectly for the benefit of any related person during the tax year is computed under sub-rule (2) in these circumstances:
| Clause | Circumstance |
|---|---|
| (a) | Income or property lent to a related person for any period during the year without adequate security |
| (b) | Income or property lent to a related person without adequate interest |
| (c) | Land, building or other property made available for the use of a related person without charging adequate rent or other compensation |
| (d) | Salary, allowance or otherwise paid to a related person for services rendered, in excess of what may reasonably be paid for those services |
| (e) | Services or goods or both made available to a related person without adequate consideration or other compensation |
| (f) | Share, security or other property purchased from a related person for consideration more than adequate |
| (g) | Share, security or other property sold to a related person for consideration less than adequate |
| (h) | Income diverted in favour of a related person, where the aggregate of the income exceeds Rs 1,000 |
| (i) | Property diverted in favour of a related person, where the value of the property exceeds Rs 1,000 |
| (j) | Funds invested, or continuing to remain invested, for any period during the year — not being a period before 1 January 1971 — in any concern in which a related person has a substantial interest |
Sub-rule (2): the income is the value of any benefit or facility granted or provided free of cost or at concessional rate to the related person. Sub-rule (3): "related person" has the meaning in section 355(h).
Clauses (a), (b), (c) and (j) of rule 183(1) are all drafted in two tenses: property "is, or continues to be" lent, made available, or invested. That is deliberate. A loan made to a trustee ten years ago without adequate security is caught in every tax year it remains outstanding, not only in the year it was made. So is a building let to a founder's family at a low rent, and so is a legacy shareholding in a concern where a related person has a substantial interest. Reviewing only the year's new transactions misses most of what this rule catches. The right exercise is an annual review of every continuing position with a related person.
Note that the measure in sub-rule (2) is the value of the benefit, not the amount of the transaction. On an interest-free loan the income is the interest forgone, not the principal; on a rent-free building it is the rent forgone. Clauses (h) and (i) are different in kind — there the whole diverted income or property is in issue, subject to the Rs 1,000 threshold, which is a legacy figure that almost any diversion will exceed.
Rule 186 — changing the purpose of an accumulation
Where a registered non-profit organisation has accumulated or set apart part of its regular income under section 342(1), it may request the Assessing Officer to change the purpose for which the income is accumulated, by applying in Form No. 110.
| Element | Provision in rule 186 |
|---|---|
| Application | Form No. 110 to the Assessing Officer — sub-rule (1) |
| Mode | Furnished electronically: under digital signature if the return of income must be so furnished, otherwise through electronic verification code — sub-rule (2)(a) |
| Verification | By the person authorised to verify the return of income under section 265, as applicable to the applicant — sub-rule (2)(b) |
| Order | The Assessing Officer may, subject to section 342(2), allow the income to be applied for such other charitable or religious purposes in India as are in conformity with its objects, in Form No. 111 — sub-rule (3) |
Sub-rule (3) of rule 186 does not let an organisation redirect an accumulation anywhere it likes. The substituted purpose must be charitable or religious, must be in India, and must be in conformity with the organisation's own objects. So the change is a re-allocation within the objects clause, not a route around it. And the whole discretion is subject to section 342(2), which sets the conditions on accumulation itself. The application is worth making early: until Form No. 111 issues, the accumulation remains tied to its original purpose, and an accumulation applied to an unapproved purpose is exposed under section 342.
Worked example
| Facts | Position under rules 182, 183 and 186 |
|---|---|
| NPO runs a permissible training business alongside its charitable work | Gains computed as a separate entity under Part D of Chapter IV |
| Single ledger split at the year end | Rule 182(b) requires separate books maintained |
| Activity outside sections 344 to 346 | Rule 182 does not apply — the activity is not permissible |
| Interest-free loan to a trustee, made in 2019, still outstanding | Caught each year — clause (b), "continues to be" |
| Building let to a founder's son at a nominal rent | Clause (c); the income is the rent forgone |
| Trustee paid Rs 30 lakh for services worth Rs 8 lakh | Clause (d) — the excess is the benefit |
| Shares bought from a related person above market | Clause (f) |
| Legacy holding in a concern where a trustee has a substantial interest | Clause (j), for every year it remains |
| Rs 900 of income diverted to a related person | Below the Rs 1,000 threshold in clause (h) |
| Accumulation for a hospital wing to be redirected to a school | Form No. 110, if in conformity with the objects |
| Redirection to a purpose outside India | Not available — the purpose must be in India |
| Form No. 110 filed on paper | Defective — electronic filing is required |
Compliance checklist
- Confirm the activity is permissible under sections 344, 345 and 346 before applying rule 182.
- Set up separate books for it at the outset, not at the year end.
- Compute its gains under Part D of Chapter IV, as a separate entity.
- Review every continuing arrangement with a related person annually, not only new ones.
- Value the benefit as the amount forgone — interest, rent, or the excess paid.
- Watch clause (j) for legacy investments in related-person concerns.
- Apply in Form No. 110 before applying an accumulation to a different purpose.
- Ensure the new purpose is charitable or religious, in India, and within the objects, and wait for Form No. 111.
Common mistakes
- Reconstructing separate accounts instead of maintaining them.
- Reviewing only the year's new related-person transactions.
- Treating the loan principal as the income under clause (a) or (b).
- Overlooking a legacy shareholding under clause (j).
- Redirecting an accumulation before Form No. 111 issues.
- Choosing a new purpose outside the objects clause.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. Rule 182 has no 1962 parallel; rule 183 corresponds to section 13(2) and rule 186 to section 11(3A) of the repealed Income-tax Act, 1961, given for tracing only. Verify the current text before acting.