Sections 338-340 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.
When a registered non-profit organisation computes its regular income, section 338 says two things are left out: income applied outside India where the Board so directs, and corpus donations. Section 339 defines a corpus donation; section 340 lets certain donations for renovation or repair of places of worship be treated, at the organisation's option, as part of the corpus. This article reads the three sections as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
A corpus donation is a donation made with a specific direction by the donor that it forms part of the corpus, invested or deposited in a mode permitted under section 350 and maintained specifically for the corpus. It is not included in regular income. A deemed corpus donation lets sums received for renovation or repair of a notified temple, mosque, gurudwara, church or other place be treated as corpus, at the organisation's option, if four conditions are met.
Where these sections fit
Sections 335 and 336 define regular income of a registered non-profit organisation and its taxable part; section 337 lists specified income. Our articles on sections 333 to 336 and on section 337 cover those. Sections 338 to 340 sit between them and deal with what is kept out of regular income. For registration under section 332, see our article on section 332. For help with a trust or society that receives corpus donations, our 12A, 80G and CSR registration team can assist.
Section 338: income not to be included in regular income
While computing the regular income of a registered non-profit organisation, the following is not included:
| Clause | Excluded item |
|---|---|
| (a) | Income applied outside India, where the Board, by general or special order, directs that the income shall not be so included in its total income, in the case of a registered non-profit organisation (i) created before the 1st April, 1952 for charitable or religious purposes; or (ii) created on or after the 1st April, 1952 for charitable purposes where such application of income outside India tends to promote international welfare in which India is interested |
| (b) | The corpus donation received by the registered non-profit organisation under section 339 |
Clause (a): income applied outside India
The exclusion for foreign application depends on a Board order, general or special. Without one, income applied outside India in contravention of clause (a) becomes specified income under row 3 of the Table in section 337. What orders the Board has made is not in the text consulted. The two categories differ: an organisation created before 1 April 1952 can be for charitable or religious purposes; one created on or after that date must be for charitable purposes and the application outside India must tend to promote international welfare in which India is interested.
Clause (b): corpus donation
The corpus donation is left out of regular income. The definition follows.
Section 339: corpus donation
Corpus donation means any donation made with a specific direction by the donor that it shall form part of the corpus of the registered non-profit organisation, provided that such donation is invested or deposited in any of the modes permitted under section 350 maintained specifically for such corpus.
Three elements are required:
| Element | What the text requires |
|---|---|
| Donor's direction | A specific direction by the donor that the donation shall form part of the corpus |
| Mode | Investment or deposit in a mode permitted under section 350 |
| Separation | The investment or deposit is maintained specifically for the corpus |
If a donation is directed to corpus but is not invested or deposited as required, it does not meet the definition. An investment or deposit in breach of section 350 out of corpus is specified income under row 4 of the Table in section 337. The modes themselves are in section 350 and Schedule XVI, and are not repeated here.
Section 340: deemed corpus donation
Section 340 applies where the property of a registered non-profit organisation includes any temple, mosque, gurudwara, church or other place notified under section 133(1)(b)(vi). Any sum or sums received by the organisation as donation for the purpose of renovation or repair of such a place may, at its option, be deemed as forming part of the corpus under section 339, if it:
| Clause | Condition |
|---|---|
| (a) | Maintains such corpus as separately identifiable |
| (b) | Applies such corpus only for the purpose for which the donation was made |
| (c) | Invests or deposits such corpus in any of the modes permitted under section 350 |
| (d) | Does not apply such corpus for making donation to any person |
Points to notice:
- The place must be one notified under section 133(1)(b)(vi). Which places have been notified is not in the text consulted.
- The treatment is optional: the organisation may choose it.
- All four conditions must be met. A violation of any of them makes the deemed corpus donation specified income under row 5 of the Table in section 337.
- Unlike an ordinary corpus donation under section 339, there is no requirement of a specific direction by the donor to treat the sum as corpus; the donation need only be for renovation or repair of the notified place.
A worked example
Names and amounts are assumed.
The Dharmarth Trust is a registered non-profit organisation.
Corpus donation. A donor gives Rs. 10,00,000 with a written direction that it forms part of the trust's corpus. The trust deposits it in a mode permitted under section 350 in an account kept only for the corpus. This meets section 339: a specific direction, a permitted mode and a separate account. Under section 338(b), the Rs. 10,00,000 is not included in the trust's regular income.
Not a corpus donation. Another donor gives Rs. 3,00,000 without any direction as to the corpus. This is not a corpus donation under section 339; it is outside the exclusion in section 338(b) and, if it is a voluntary contribution, falls within regular income under section 335(d).
Deemed corpus donation. The trust owns a temple notified under section 133(1)(b)(vi) (assumed). Devotees give Rs. 6,00,000 for repair of the temple. The trust opts for section 340. It keeps the Rs. 6,00,000 separately identifiable, spends it only on the repair, invests the unspent part in a permitted mode, and makes no donation of it to any person. The Rs. 6,00,000 is deemed to be part of the corpus under section 339.
Breach. If the trust instead donated Rs. 1,00,000 of that corpus to another person, condition (d) would be violated, and that deemed corpus donation would be specified income of the tax year of violation (section 337, row 5).
Need help with donations to a non-profit organisation?
Whether a donation counts as corpus depends on the donor's direction, the way it is invested and how it is kept. If you manage a trust or society, or advise donors, our team can help you document donations so that the corpus treatment is clear. See our 12A, 80G and CSR registration service.
Key takeaways
- Corpus donations and, where the Board so directs, income applied outside India for the categories named, are left out of regular income.
- A corpus donation needs a specific direction by the donor, investment or deposit in a mode permitted under section 350, and maintenance specifically for the corpus.
- A deemed corpus donation covers donations for renovation or repair of a notified temple, mosque, gurudwara, church or other place, at the organisation's option.
- Four conditions apply to a deemed corpus donation: separate identification, application only for the purpose, permitted modes of investment, and no donation of the corpus to any person.
- Breaching the conditions can produce specified income under section 337.
Read next
- Section 337: specified income of a registered non-profit organisation
- Sections 341 to 343: application of income and accumulated income
- Sections 333 to 336: switching of regimes and regular income
- Section 332: registration of a non-profit organisation
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.