Section 354
Section 354: application for approval for purpose of Section 133(1)(b)(ii)
Section 354 governs the separate approval an organisation needs so that donors can claim a deduction for donations made to it under Section 133(1)(b)(ii) - distinct from the Section 332 registration that lets the organisation itself claim exemption on its own income.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
Who can apply, and the conditions
Sub-section (1): a registered non-profit organisation, or a person referred to in the relevant Table entry of Schedule VII, may apply to the Principal Commissioner or Commissioner, in the prescribed form and manner, for approval for the purpose of Section 133(1)(b)(ii), subject to these conditions:
- It is not expressed to be for the benefit of any particular religious community or caste
- It is established in India for a charitable purpose, and does not incur religious-nature expenditure exceeding 5% of its total income in a tax year
- The instrument or rules governing it do not allow transfer, at any time, of the whole or any part of its assets for any purpose other than a charitable purpose
- It maintains regular accounts of its receipts and expenditure
- It prepares and delivers a prescribed statement, for the prescribed period, to the prescribed income-tax authority in the prescribed form and manner, within the prescribed time
- It delivers a correction statement to rectify a mistake, or to add, delete or update information in that statement, in the prescribed form and manner
- It furnishes a certificate to the donor, specifying the amount of donation, within the prescribed period from the date of receipt, containing the prescribed particulars
Filing deadlines, order deadlines and validity of approval
Sub-section (2) sets out, case by case, when to apply, the time limit for the Principal Commissioner or Commissioner's order, and how long the approval remains valid:
| Case | When to apply | Time limit for the order | Validity of approval |
|---|---|---|---|
| 1. Activities of the applicant have not commenced | Any time during the tax year from which approval is sought | 1 month from the end of the month in which the application is made | 3 tax years, commencing from the tax year of application |
| 2. Activities of the applicant have commenced | Any time during the tax year from which approval is sought | 6 months from the end of the quarter in which the application is made | 5 tax years, commencing from the tax year of application |
| 3. Applicant has provisional approval and activities have commenced | Within 6 months of commencement of activities | 6 months from the end of the quarter in which the application is made | 5 tax years, commencing from the tax year of application |
| 4. Provisional approval is due to expire, activities not yet commenced | At least 6 months before expiry of the provisional approval | 6 months from the end of the quarter in which the application is made | 5 tax years, following the tax year of application |
| 5. Approval is due to expire | At least 6 months before expiry of the approval | 6 months from the end of the quarter in which the application is made | 5 tax years, following the tax year of application |
How the application is processed
Sub-section (3): for applications under Cases 2 to 5, the Principal Commissioner or Commissioner calls for documents, information or makes inquiries to be satisfied about the genuineness of the activities and compliance with other applicable laws. If satisfied, an order approving the application is passed in writing. If not satisfied, after giving the applicant a reasonable opportunity of being heard, the officer either rejects the application (Case 2) or rejects the application and cancels the approval (Cases 3 to 5), sending a copy of the order to the applicant and the Assessing Officer.
Sub-section (4): for a Case 1 application, the Principal Commissioner or Commissioner passes an order granting provisional approval.
Frequently asked questions
Is approval under Section 354 the same as registration under Section 332?
No - Section 332 registration lets the organisation itself claim exemption on its own income, while Section 354 approval lets donors claim a deduction under Section 133(1)(b)(ii) for donations made to the organisation.
Is there a cap on religious-nature expenditure for Section 354 approval?
Yes - under Section 354(1)(b), the organisation must not incur expenditure of a religious nature exceeding 5% of its total income during a tax year.
Does the organisation have to give donors a receipt?
Yes - Section 354(1)(g) requires it to furnish the donor a certificate specifying the donation amount, within the prescribed period from the date of receipt, containing the prescribed particulars.
Related sections
Want this applied to your actual filing, not just explained?
Get help applying for Section 354 donation-deduction approvalLast updated 9 September 2026