Section 353: other violations

What triggers Section 353

Sub-section (1): where a registered non-profit organisation, during any tax year -

• Fails to maintain books of account under Section 347, or
• Fails to get its books of account audited under Section 348, or
• Fails to furnish its return of income under Section 349, or
• Being an organisation carrying out advancement of any other object of general public utility, carries out commercial activity in contravention of Section 346

What happens to its income

its regular income for that tax year, reduced by the expenditure referred to in sub-section (3), becomes "taxable regular income", chargeable to tax under Section 334.

Sub-section (2): notwithstanding Section 338, any specified income and residual income not covered by sub-section (1) is also chargeable to tax under Section 334.

What expenditure can be deducted

Sub-section (3): the expenditure referred to in sub-section (1) is expenditure incurred in India (other than capital expenditure) for the organisation's objects, subject to all of the following conditions:

• The expenditure is incurred in India
• It is for the objects of the registered non-profit organisation
• It is not made from the corpus standing to the organisation's credit as on the end of the preceding tax year
• It is not funded out of any loan or borrowing
• No depreciation is claimed on an asset whose acquisition has already been claimed as application of income (in the same or any other tax year)
• It is not in the form of a contribution or donation to any person
• It does not involve a payment (or aggregate of payments) to a person in contravention of Section 36(4), (5), (6) or (7)
• The payment is allowable under Section 35(b)(i)

No other deductions allowed

Sub-section (4): no set-off, deduction or allowance for any application or expenditure, other than the expenditure described in sub-section (3), is allowed while computing tax under this section.

Frequently asked questions