India’s Central Board of Direct Taxes (CBDT) has set new conditions for registered nonprofit mergers seeking an exemption from tax on accreted income, including a five-year limit on changes to the surviving group’s stated purposes, called its objects in the rules.
The Income-tax (Eighth Amendment) Rules, 2026, were published in the Official Gazette on Oct. 30 and took effect that day. They add Rule 189A to the Income-tax Rules, 2026, implementing Section 354A of the Income-tax Act, 2025. The restriction on changing the survivor’s objects runs for five years beginning when the financial year of the merger closes.
To qualify, the organizations must have the same or similar objects. A registered nonprofit cannot merge with a provisionally registered one, and the merger must not directly or indirectly benefit a related person of either organization.
The merging organization must have no outstanding tax, interest, penalty, fine or other amount under an order that is not being appealed. If an amount is under appeal, the survivor must pay it after the appeal is finally decided.
The merging organization’s assets and liabilities pass to the survivor on the merger date. The survivor also takes responsibility for specified statutory and tax-related obligations, while assessments and other proceedings involving the merging organization continue against the survivor. An accountant must audit both organizations’ books as of the merger date.
Section 354A provides an exception to Section 352, which imposes tax on accreted income, when registered nonprofits with the same or similar objects meet the prescribed conditions. The rules apply beyond charitable trusts to public trusts, societies, Section 8 companies, universities and other eligible institutions.
The survivor must file Form No. 112A electronically with its jurisdictional Principal Commissioner or Commissioner by the end of the calendar month after the merger month. The filing must use a digital signature or electronic verification code. Required documents include both organizations’ trust deeds and registration records, the merger resolution, reasons for the merger and audited accounts. Those accounts must cover the merger date and the fiscal year before the tax year in which the merger takes place.
