Sections 354 and 354A 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.
Section 354 of the Income-tax Act, 2025 sets the conditions, time limits and procedure for the approval a charity needs for donations to qualify under section 133(1)(b)(ii). Section 354A, inserted by the Finance Act, 2026, disapplies section 352 where one registered non-profit organisation merges with another on stated terms. This article follows the text as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
A registered non-profit organisation, or a person referred to in Schedule VII (Table, serial number 1), may apply to the Principal Commissioner or Commissioner for approval for the purpose of section 133(1)(b)(ii), on seven conditions in section 354(1)(a) to (g). The Table in sub-section (2) fixes, for five cases, when to apply, when the order must be passed and how long the approval is valid (three or five tax years). Section 354A: a merger with another registered non-profit organisation of the same or similar objects, on prescribed conditions, takes the case out of section 352.
Where these sections sit
Section 354 is part 6, "Approval for purpose of deduction under section 133(1)(b)(ii)", of Part B of Chapter XVII. Section 133 itself, the donations deduction, has its own post: section 133. The Chapter is summarised in the Chapter XVII guide. Later amendments, rules and notifications should be checked.
For help with approvals and donor-deduction compliance see our page on 12A, 80G and CSR registration.
Section 354(1): who may apply and on what conditions
An application for approval, in such form and manner as may be prescribed, may be made to the Principal Commissioner or Commissioner by:
- a registered non-profit organisation; or
- a person referred to in Schedule VII (Table, serial number 1).
The applicant must meet these conditions:
| Clause | Condition |
|---|---|
| (a) | It is not expressed to be for the benefit of any particular religious community or caste |
| (b) | It is established in India for a charitable purpose and does not incur expenditure exceeding 5% of its total income during a tax year which is of a religious nature |
| (c) | The instrument under which it is constituted, or the rules governing it, contain no provision for the transfer at any time of the whole or any part of its assets for any purpose other than a charitable purpose |
| (d) | It maintains regular accounts of its receipts and expenditure |
| (e) | It prepares a statement for the prescribed period and delivers it to the prescribed income-tax authority or person authorised by that authority, in the prescribed form, verified in the prescribed manner, with the prescribed particulars and within the prescribed time |
| (f) | It delivers a correction statement to rectify any mistake or to add, delete or update information in the statement under clause (e), in the prescribed form and verified in the prescribed manner |
| (g) | It furnishes a certificate to the donor specifying the amount of donation within the prescribed period from receipt of the donation, with the requisite particulars, in the prescribed manner |
The detail of forms, statements and periods in clauses (e), (f) and (g) is left to the Income-tax Rules, 2026; see our rule-wise guides.
Section 354(2): the Table of time limits
The application is made in the cases in column B of the Table, within the time limit in column C. The Principal Commissioner or Commissioner follows sub-sections (3) and (4), passes a written order within the time limit in column D, and the approval, if granted, is valid for the period in column E.
| Serial number | Case (column B) | Time limit for furnishing application (column C) | Time limit for passing order (column D) | Validity of approval (column E) |
|---|---|---|---|---|
| 1 | Where the activities of the applicant have not commenced | At any time during the tax year from which approval is sought | One month from the end of the month in which application is made | Three tax years commencing from the tax year in which such application is made |
| 2 | Where the activities of the applicant have commenced | At any time during the tax year from which approval is sought | Six months from the end of the quarter in which application is made | Five tax years commencing from the tax year in which such application is made |
| 3 | Where the applicant has provisional approval and activities have commenced | Within six months of the commencement of activities | Six months from the end of the quarter in which application is made | Five tax years commencing from the tax year in which such application is made |
| 4 | Where the provisional approval of the applicant is due to expire and activities have not commenced | At least six months prior to the expiry of the provisional approval | Six months from the end of the quarter in which application is made | Five tax years following the tax year in which such application is made |
| 5 | Where the period for approval of a registered non-profit organisation is due to expire | At least six months prior to the expiry of the said approval | Six months from the end of the quarter in which application is made | Five tax years following the tax year in which such application is made |
Note the difference in the last column: serial numbers 1, 2 and 3 say "commencing from" the tax year of the application, serial numbers 4 and 5 say "following" it.
Section 354(3): what the authority does on serial numbers 2 to 5
Where the application is in a case in serial numbers 2 to 5, the Principal Commissioner or Commissioner calls for documents or information or makes inquiries as he thinks necessary to satisfy himself about the genuineness of the activities and compliance with such requirements of any other law in force as are material for achieving its objects. Then:
- (a) if satisfied about the objects, the genuineness and the compliance, he passes an order in writing approving it; or
- (b) if not satisfied, after a reasonable opportunity of being heard, he passes an order in writing: (i) rejecting the application, where it was made in a case in serial number 2; and (ii) in any other case, rejecting the application and also cancelling the approval.
A copy of the order goes to the applicant and the Assessing Officer. The Act names no other law; check the law concerned.
Section 354(4): provisional approval
Where the application is in a case in serial number 1, the Principal Commissioner or Commissioner shall pass an order granting provisional approval. Section 354(4) does not make the grant depend on an inquiry.
Section 354A: merger of registered non-profit organisations
Section 354A was inserted by the Finance Act, 2026 with effect from 1 April 2026. Where any registered non-profit organisation merges with any other registered non-profit organisation, the provisions of section 352 shall not apply if:
- (a) the other registered non-profit organisation has the same or similar objects; and
- (b) the merger fulfils such conditions as may be prescribed.
The detail of the conditions is left to the Income-tax Rules, 2026. The effect is on the charge on accreted income: see our articles on section 352, first five cases and section 352, remaining cases. One drafting point: the marginal heading of section 354A reads "Merger of registered non-profit organisation in certain cases" in the copy consulted.
Worked example
Asha Deep Foundation (an invented name) is established in India for a charitable purpose and has not yet started activities. It applies for approval at any time during the tax year from which it wants approval (serial number 1). The Principal Commissioner or Commissioner passes an order granting provisional approval; the order is due one month from the end of the month in which the application was made. If the application was made on 12 August, the end of that month is 31 August and the order is due by 30 September. The approval is valid for three tax years commencing from the tax year of the application.
Once activities commence, the foundation applies within six months of the commencement of activities (serial number 3). The order is due six months from the end of the quarter in which the application is made. If approved, the approval is valid for five tax years commencing from the tax year of that application.
Need help with approval for donation deductions?
If your charity wants approval so that donors can claim a deduction, or must renew an existing approval, our team can help you plan the application timeline. Please contact us through the page for 12A, 80G and CSR registration.
Key takeaways
- Section 354(1) has seven conditions; one is that religious expenditure does not exceed 5% of total income in a tax year.
- Serial number 1 of the Table: provisional approval, valid for three tax years.
- Serial numbers 2 to 5: five tax years, order within six months from the end of the quarter of the application.
- Applications for renewal or conversion from provisional approval must be made at least six months before expiry (serial numbers 4 and 5).
- Section 354A takes a qualifying merger of registered non-profit organisations out of section 352.
Read next
- Section 352: tax on accreted income, first five cases
- Section 355: definitions for registered non-profit organisations
- Section 133: donations deduction
- 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.