Schedule XVI of the Income-tax Act, 2025 lists the permitted modes of investing or depositing money referred to in section 350 by a registered non-profit organisation, including Government savings certificates, Post Office deposits, scheduled bank deposits and Government securities.
Schedule XVI is not a transition and savings provision. It is read with section 350 and lists the permitted modes of investment or deposit by a registered non-profit organisation. The transition from the 1961 Act is section 536 — repeal and savings.
What Schedule XVI governs
Schedule XVI is the investment rulebook for registered non-profit organisations — the successor to section 11(5) of the Income-tax Act, 1961. It is read with section 350 in the new non-profit code in Chapter XVII.
Paragraph 1 opens: 'The modes of investing or depositing the money referred to in section 350 shall be the following', and then lists them. Investing outside these modes is a specified violation with consequences under sections 351 to 353, including tax on accreted income under section 352.
The list is deliberately conservative — Government savings instruments, Post Office and scheduled bank deposits, Government securities, guaranteed debentures, public sector companies and specified long-term finance bonds.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026 because of the repeal and savings provision in section 536. The Schedule contents described here are taken from the Act as enacted, incorporating the corrigenda notified in the Gazette on 3 September 2025.
Where each provision actually sits
| Topic | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Permitted modes of investment | Section 11(5) | Section 350 with Schedule XVI |
| Registration of a trust or institution | Sections 12A and 12AB | Section 332 |
| Denial of exemption on violation | Section 13 | Sections 351 and 353 |
| Tax on accreted income | Section 115TD | Section 352 |
| Books of account for an NPO | Section 12A(1)(b) | Section 347 |
| Audit | Section 12A(1)(b) | Section 348 |
| Return | Section 139(4A) | Section 349 |
| Repeal and savings | Section 297 | Section 536 |
The permitted modes
Government savings instruments
(1) Investment in savings certificates as defined in section 2(c) of the Government Savings Certificates Act, 1959, and any other securities or certificates issued by the Central Government under its Small Savings Schemes. (2) Deposit in any account with the Post Office Savings Bank.
Bank and co-operative deposits
(3) Deposit in any account with a scheduled bank or a co-operative society engaged in the business of banking, including a co-operative land mortgage bank or a co-operative land development bank.
Units and Government securities
(4) Investment in units of the Unit Trust of India. (5) Investment in any security for money created and issued by the Central Government or a State Government.
Guaranteed debentures and public sector companies
(6) Investment in debentures issued by or on behalf of any company or corporation where both principal and interest are fully and unconditionally guaranteed by the Central or a State Government. (7) Investment or deposit in any public sector company — with transitional protection where the company ceases to be a public sector company: shares remain a permitted investment for three years from that date, and other investments or deposits remain permitted until they become repayable.
Long-term finance bonds
(8) Deposits with, or bonds issued by, a financial corporation providing long-term finance for industrial development in India and eligible for deduction under section 32(e). (9) The same for a public company whose main object is providing long-term finance for construction or purchase of houses in India for residential purposes. (10) The same for a public company providing other specified long-term finance.
Where the transition provisions actually are
The move from the Income-tax Act, 1961 to the Income-tax Act, 2025 is governed by section 536 — repeal and savings, the successor to section 297. It is section 536 that keeps the 1961 Act alive for every tax year up to 31 March 2026 and for all assessments, appeals, penalties and prosecutions relating to those years.
Worked example
A registered non-profit organisation's investments in tax year 2026-27.
| Investment | Permitted under Schedule XVI? | Mode |
|---|---|---|
| Fixed deposit with a scheduled bank | Yes | Mode (3) |
| Post Office Savings Bank account | Yes | Mode (2) |
| Central Government securities | Yes | Mode (5) |
| Units of the Unit Trust of India | Yes | Mode (4) |
| Shares of a listed private sector company | No | Not a permitted mode |
| Shares of a public sector company that was privatised last year | Yes, for three years from the date it ceased to be a public sector company | Mode (7)(a) |
| Debentures of a company, guaranteed by a State Government | Yes | Mode (6) |
The fifth row is the exposure. An investment outside the permitted modes is a specified violation, with consequences under sections 351 to 353 and potential tax on accreted income under section 352.
The sixth row shows the transitional protection built into mode (7): privatisation does not make the holding immediately non-compliant.
Compliance checklist
- Check every investment against the modes in Schedule XVI before committing funds.
- Where a public sector company is privatised, track the three-year window for shares and the repayment date for other investments under mode (7).
- For guaranteed debentures, confirm both principal and interest are fully and unconditionally guaranteed.
- For long-term finance bonds, confirm the issuer is eligible for deduction under section 32(e).
- Read section 350 alongside the Schedule; the Schedule supplies the modes, the section the obligation.
- An investment outside the permitted modes risks a specified violation under section 351 and accreted income tax under section 352.
- For the transition from the 1961 Act, read section 536.
Common mistakes
- Expecting transitional or savings provisions in Schedule XVI.
- Investing NPO funds in listed equity or mutual funds outside the permitted modes.
- Assuming a debenture qualifies where only the principal, not the interest, is guaranteed.
- Overlooking the three-year window after a public sector company is privatised.
- Reading Schedule XVI without section 350 and the violation provisions in sections 351 to 353.
All sixteen Schedules of the Income-tax Act, 2025
Because the numbering is widely misquoted, the full list is reproduced below from the Act as enacted. Note that Schedules II to VII are all exemption lists, split by who is claiming rather than by what the income is.
| Schedule | Read with | Subject as enacted |
|---|---|---|
| I | section 9(12) | Conditions for certain activities not to constitute business connection in India |
| II | section 11 | Income not to be included in total income |
| III | section 11 | Income not to be included in total income of eligible persons |
| IV | section 11 | Income not to be included in total income of eligible non-residents, foreign companies and other such persons |
| V | section 11 | Income not to be included in total income of certain eligible persons including investment funds, business trusts and their unit holders |
| VI | section 11 | Income not to be included in total income of certain eligible persons in an International Financial Services Centre or having income therefrom |
| VII | section 11 | Persons exempt from tax |
| VIII | section 12 | Income not to be included in the total income of political parties and electoral trusts |
| IX | section 48 | Deduction for tea, coffee and rubber development accounts |
| X | section 49 | Deduction for Site Restoration Fund |
| XI | section 2(91) | Recognised provident funds, approved superannuation funds and approved gratuity funds |
| XII | section 51 | Minerals, and groups of associated minerals |
| XIII | section 45(2) | List of articles or things |
| XIV | section 55 | Insurance business |
| XV | section 123 | Deduction for life insurance premia, contribution to provident fund, subscription to certain equity shares, etc. |
| XVI | section 350 | Permitted modes of investment or deposits by a registered non-profit organisation |
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.