Section 344: business undertaking held as property

Introduction

Section 344 addresses a business undertaking held as property by a registered non-profit organisation. Where the organisation claims the undertaking’s income qualifies for this Part, the Assessing Officer can determine that income under the Act.

Key takeaways

What Section 344 says

"Where the property held by a registered non-profit organisation includes a business undertaking, and where a claim is made that the income of any such undertaking is eligible for benefits under this Part, then the Assessing Officer shall have the power to determine the income of such business undertaking as per the provisions of this Act."

In other words, the Assessing Officer is not bound to simply accept the figures in the organisation's own books - the AO can independently determine the income of the business undertaking under the general provisions of the Act.

Why this matters

If the Assessing Officer determines the business undertaking's income to be higher than what is shown in the organisation's books of account, that excess becomes specified income under Section 337 (item 11 of the table), taxable in the tax year to which it relates.

When this provision applies

Two facts trigger this provision: the registered non-profit organisation holds a business undertaking as property, and it claims that the undertaking’s income is eligible for benefits under this Part.

The income determination must follow the Act. Prepare a reconciliation from the undertaking’s accounts to the tax computation rather than relying only on the organisation’s registration certificate.

Limits and procedural safeguards

Section 344 is an income-determination power, not a statement that every business activity of an organisation is permitted. The separate commercial-activity conditions remain relevant.

Section 337, Table item 11, addresses the excess of officer-determined income over the income shown in the undertaking’s books. Do not classify the entire undertaking’s income as that excess merely because a difference exists.

Step-by-step review

1. Identify the business undertaking held as property and the precise benefit claimed for its income.

2. Prepare the undertaking’s accounts and the statutory income computation with an explanation for each adjustment.

3. Reconcile any officer-determined figure to the book income for the same tax year.

4. Classify an excess under Section 337 item 11 and apply the Section 334 computation separately from other income categories.

Hypothetical example

Hypothetical: the undertaking’s books show income of ₹8 lakh and the Assessing Officer determines ₹10 lakh under the Act. The ₹2 lakh excess, rather than the entire ₹10 lakh merely on that basis, is specified income under Section 337 item 11 for the year to which it relates. Section 334(1)(a) applies a 30% base rate to specified income; other applicable levies and the remaining income computation must be considered separately.

Records to prepare

Retain undertaking-level accounts, invoices and the working for each book-to-tax adjustment.

Keep the assessment determination and a reconciliation identifying the excess and its tax year.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 344 and related provisions

Step-by-step flow for applying Section 344

1. 1

   Does the property held by the registered non-profit organisation include a business undertaking?

   • No: Section 344 does not apply.
   • Yes: Go to the next step.
2. 2

   Is a claim made that the undertaking's income is eligible for benefits under this Part?

   • No: Section 344 is not triggered.
   • Yes: Go to the next step.
3. 3

   The Assessing Officer may determine the undertaking's income

   Section 344 gives the Assessing Officer the power to determine that income as per the provisions of this Act. The figure shown in the organisation's books is not binding on him.

4. 4

   Apply the rest of the Part to the income so determined

   Section 344 does not itself state what follows from a higher figure. Use the determined income when applying the other provisions of this Part, and check separately whether the commercial activity is allowed under Sections 345 or 346.

Practical checklist

Glossary

Book-to-tax reconciliation

A working that explains differences between income in the accounts and income computed under the Act.

Specified income

The separately identified NPO income category in Section 337, including the item 11 excess.

Frequently asked questions