Chapter XVII - Special Provisions Relating to Certain Persons
Section 338
Section 338: income not to be included in regular income
Section 338 carves out two specific categories of income that are kept out of a registered non-profit organisation's "regular income" altogether - certain Board-approved application of income outside India, and corpus donations.
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Need advice on Section 338?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
While computing the regular income of a registered non-profit organisation, the following income shall not be included:––
(a) income applied outside India, where the Board, by general or special order, directs that such income shall not be so included in its total income in 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.
Introduction
Section 338 removes two specific items from regular income: qualifying overseas application with a Board direction, and corpus donations meeting section 339.
Outside-India spending does not qualify merely because it serves a charitable purpose; the statutory organisation/date conditions and Board direction matter.
Key takeaways
Outside-India use needs a Board order
An overseas application is excluded only where the Board gives the applicable general or special direction and the organisation meets the statutory date and purpose conditions.
Corpus donations are excluded
A corpus donation received under Section 339 is not included in regular income.
What is excluded from regular income
While computing the regular income of a registered non-profit organisation, the following income is not included:
- Income applied outside India, where the Board directs by general or special order that it shall not be included, in the case of an organisation created before 1 April 1952 for charitable or religious purposes, or created on or after 1 April 1952 for charitable purposes where the application of income outside India tends to promote international welfare in which India is interested
- Corpus donation received by the registered non-profit organisation under Section 339
Application outside India requires a Board direction
Clause (a) covers only the stated historical or charitable organisations and only where the Board directs that the outside-India application is excluded. The purpose and the date on which the organisation was created affect eligibility.
Corpus donations use the section 339 definition
Clause (b) excludes a corpus donation from regular income. Section 339 requires a specific donor direction and investment or deposit in a permitted mode maintained for that corpus.
Step-by-step flow for applying Section 338
- 1
Has any income been applied outside India?
- No: Skip to the corpus donation check (step 4).
- Yes: Go to the next step.
- 2
When and for what purpose was the organisation created?
Section 338(a)(i) covers organisations created before 1 April 1952 for charitable or religious purposes. Section 338(a)(ii) covers those created on or after that date for charitable purposes, where the application outside India tends to promote international welfare in which India is interested.
- 3
Has the Board directed, by general or special order, that this income is not to be included?
- Yes: That income is not included in regular income. Go to the next step.
- No: Section 338(a) does not exclude it. Income applied outside India in breach of Section 338(a) can be specified income under Section 337 (Sl. No. 3). Go to the next step.
- 4
Is any receipt a corpus donation under Section 339?
Under Section 338(b), a corpus donation received under Section 339 is not included in regular income.
Practical checklist
Do
- Obtain the Board’s general or special order before excluding an outside-India application under clause (a).
- For clause (b), confirm the donation satisfies the corpus definition in section 339.
Avoid
- Exclude all overseas spending or all restricted donations from regular income without checking the statutory conditions.
Illustrative example
Worked example: corpus donation and overseas application
Hypothetical facts (illustration only, not a real taxpayer): A registered charitable trust created in 2005 receives voluntary contributions of an assumed ₹12,00,000 in a tax year. Of these, ₹4,00,000 came with the donor's specific direction that it forms part of the corpus, and it was deposited in a permitted mode under Section 350 kept for the corpus. The trust also spent an assumed ₹1,00,000 on a relief project abroad without any Board order.
Corpus donation
The ₹4,00,000 meets Section 339, so Section 338(b) excludes it from regular income.
Other contributions
₹12,00,000 − ₹4,00,000 = ₹8,00,000 remains a voluntary contribution in regular income under Section 335(d).
Overseas spending
The trust was created after 1 April 1952. Even if the project promotes international welfare in which India is interested, Section 338(a)(ii) works only through a Board order. No order exists, so the ₹1,00,000 is not excluded under Section 338(a).
Follow-on check
The trust checks Section 337 (Sl. No. 3), which treats income applied outside India in contravention of Section 338(a) as specified income.
Outcome
- ₹8,00,000 of the contributions stays in regular income; the ₹4,00,000 corpus donation is excluded.
- The overseas ₹1,00,000 gets no exclusion without a Board order.
Frequently asked questions
Is income applied outside India always excluded from regular income?
No - only where the Board specifically directs by general or special order, and only for organisations created before 1 April 1952 for charitable or religious purposes, or created on/after that date for charitable purposes where the application promotes international welfare in which India is interested.
Are corpus donations part of regular income?
No - corpus donations received under Section 339 are specifically excluded from regular income under Section 338(b).
Need help applying this provision to your situation?
Check what income is excluded from your organisation's regular incomeLast updated 9 October 2026