Section 355 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 355 of the Income-tax Act, 2025 is the interpretation section for Part B of Chapter XVII, the part on registered non-profit organisations. It defines sixteen terms, from "anonymous donation" to "wholly for charitable or religious purposes". This article takes them in order, as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
Section 355 begins "For the purposes of this Part" and so applies to sections 332 to 355. Its clauses (a) to (p) fix the meaning of terms such as anonymous donation, commercial activity, registered non-profit organisation, related person (with a Rs. 1,00,000 yearly and ten lakh rupees aggregate contribution test), specified asset, specified person, substantial interest (20%) and value. Several definitions refer to the Income-tax Act, 1961 as printed.
Where this section sits
The section closes Part B of Chapter XVII; see the Chapter XVII guide and our post on section 332 (registration). The terms are used throughout the Part: for example, "application of income" in sections 341 to 343 and "accreted income" in section 352. Later amendments, rules and notifications should be checked.
Questions on trusts, societies and donor deductions can be taken up through our page on 12A, 80G and CSR registration.
The definitions, clause by clause
| Clause | Term | Meaning as printed (summarised) |
|---|---|---|
| (a) | Anonymous donation | Any voluntary contribution referred to in section 2(49)(c), where the person receiving it does not maintain a record of the identity indicating the name and address of the person making the contribution and such other particulars as may be prescribed |
| (b) | Approval | An approval under the second proviso to section 80G(5) of the Income-tax Act, 1961 (43 of 1961) or section 354 |
| (c) | Cancellation | Includes withdrawal |
| (d) | Donation | Any voluntary contribution received by a registered non-profit organisation from any person |
| (e) | Commercial activity | Any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity |
| (f) | 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 does not include approval under the second proviso to section 80G(5) of that Act or section 354 |
| (g) | Registered non-profit organisation | Any person having a valid registration under any specified provision, where the registration has not been cancelled |
| (h) | Related person | See below |
| (i) | Relative | See below |
| (j) | Residual income | The total income without giving effect to the provisions of this Part, as reduced by regular income and specified income |
| (k) | Specified asset | See below |
| (l) | Specified person | Any person registered under any specified provision at any time since its incorporation or creation |
| (m) | Specified provision | Section 12A, 12AA or 12AB or section 10(23C) of the Income-tax Act, 1961 (43 of 1961) or section 332 |
| (n) | Substantial interest | See below |
| (o) | Value | The value of any benefit or facility granted or provided at no cost or at concessional rate to any related person |
| (p) | Wholly for charitable or religious purposes | Wholly for charitable purposes or wholly for religious purposes or wholly for charitable and religious purposes |
The references to the Income-tax Act, 1961 are quoted as printed in the section. The reader should check that Act where a definition depends on it; this article explains nothing from it.
Clause (h): related person
A "related person" is any of the following:
- the author or the founder of the registered non-profit organisation;
- any person whose total contribution to the organisation during the relevant tax year exceeds Rs. 1,00,000, or in aggregate up to the end of the relevant tax year exceeds ten lakh rupees, as the case may be;
- where the author, founder or such person is a Hindu undivided family, a member of the family;
- any trustee or manager (by whatever name called) of the organisation;
- any relative of a person referred to in (1), (3) or (4); and
- any concern in which any of the persons in (1), (3), (4) or (5) has a substantial interest.
Clause (i): relative
"Relative", for an individual, means: the spouse; a brother or sister; a brother or sister of the spouse; any lineal ascendant (maternal or paternal) or descendant of the individual; any lineal ascendant (maternal or paternal) or descendant of the spouse; the spouse of a person who is a brother or sister, a brother or sister of the spouse, or a lineal ascendant or descendant of the individual or of the spouse; and any lineal descendant of a brother or sister of either the individual or the spouse.
Clause (k): specified asset
A "specified asset" is any asset established to have been directly acquired by the specified person in one of four ways:
- (i) out of its income of the nature referred to in Schedule II (Table, serial number 1);
- (ii) during the period from its creation or establishment to the date from which registration under a specified provision became effective, if the specified person has not been allowed any benefit under this Part or under the earlier Act's provisions as named in the clause, where the provisos named there do not apply;
- (iii) during the same kind of period, where the provisos named there do apply; and
- (iv) which has been transferred to another specified person within twelve months from the end of the month of dissolution, in a case in section 352(4) (Table, serial number 9).
Specified assets matter because section 352(3) reduces accreted income by the amount attributable to them and the related liabilities. See our post on section 352 (remaining cases) for the transfer case in clause (iv).
Clause (n): substantial interest
"Substantial interest", in relation to a person in a concern, means:
- (i) where the concern is a company, shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than 20% of the voting power are, at any time during the tax year, owned beneficially by that person, or partly by that person and partly by one or more other related persons; or
- (ii) in any other concern, that person, or that person with one or more other related persons, is entitled in the aggregate, at any time during the tax year, to not less than 20% of the profits of the concern.
Clause (o): value
"Value" means the value of any benefit or facility granted or provided at no cost or at concessional rate to any related person. The term is used in the provisions of the Part that deal with benefits given to related persons.
Worked example
Meera Datta (an invented name) donates Rs. 1,20,000 in a tax year to Sundarban Relief Trust (invented), a registered non-profit organisation. Her contribution during the relevant tax year exceeds Rs. 1,00,000, so she is a related person under clause (h)(ii).
Sub-clause (v) of clause (h) names relatives of persons in sub-clauses (i), (iii) or (iv), that is, the founder, a member of the founder's HUF, or a trustee or manager. It does not name relatives of a person who is related only through the contribution test in sub-clause (ii). So Meera's brother, Rohan, is not a related person merely because her contribution exceeds Rs. 1,00,000. If Meera were instead the founder, Rohan, being her brother (clause (i)(ii)), would be a related person under sub-clause (v).
For substantial interest, suppose Rohan is a related person and holds, beneficially, shares carrying 20% of the voting power of Rohan Supplies Private Limited (invented) at some time in the tax year. The test of "not less than 20%" is met, the company is a concern in which a related person has a substantial interest, and it is a related person under clause (h)(vi). If he held shares carrying 19%, his holding alone would not meet the test, but holdings of other related persons are counted together with his.
Need help reading these definitions for your organisation?
If you need to test whether a donor, trustee or concern is a related person, or whether an asset is a specified asset, our team can help. Please contact us through the page for 12A, 80G and CSR registration.
Key takeaways
- Section 355 applies to Part B of Chapter XVII only ("For the purposes of this Part").
- A "registered non-profit organisation" has a valid, uncancelled registration under a specified provision.
- A contributor becomes a related person above Rs. 1,00,000 in the tax year or above ten lakh rupees in aggregate to the end of the tax year.
- Substantial interest means not less than 20% of voting power (company) or of profits (other concerns).
- "Value" and "specified asset" matter for later provisions of the Part, including section 352.
Read next
- Sections 354 and 354A: approval for donation deduction and merger
- Sections 351 and 353: specified and other violations
- Sections 344 to 346: commercial activities
- Chapter XVII guide
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.