Section 342: accumulated income

How to accumulate income

Sub-section (1): a registered non-profit organisation may accumulate or set apart part of its regular income for a tax year by furnishing a statement to the Assessing Officer, in the prescribed form and manner, on or before the due date under Section 263(1) for filing its return of income - stating the purpose and the period (not exceeding 5 years) for which the income is being accumulated or set apart.

Rules around the accumulation

• Amounts credited or paid to another registered non-profit organisation out of accumulated or set-apart income are not treated as application of income (sub-section 2)
• Any period during which the income is not applied for its stated purpose because of a court order or injunction is excluded from the 5-year accumulation period (sub-section 3)
• Accumulated or set-apart income must be invested or deposited in a mode permitted under Section 350, or applied for the purpose stated in the prescribed form (sub-section 4)

Changing the purpose, or applying to another organisation on dissolution

Sub-section (5): the organisation may apply to the Assessing Officer, in the prescribed form and manner, to change the purpose for which income has been accumulated or set apart.

Sub-section (6): the Assessing Officer may, on such an application (and subject to sub-section (2)), allow the organisation to apply its income for another charitable or religious purpose in India that conforms with its objects.

Sub-section (7): where a registered non-profit organisation is dissolved, the Assessing Officer may, on application in the prescribed form and manner, allow the accumulated income to be applied to another registered non-profit organisation for the year of dissolution.

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