Chapter XVII - Special Provisions Relating to Certain Persons
Section 354A
Section 354A: merger of registered non-profit organisations
Inserted by the Finance Act, 2026 with effect from 1 April 2026, Section 354A provides that Section 352 does not apply when a registered non-profit organisation merges with another registered non-profit organisation, if the other organisation has same or similar objects and the merger meets the prescribed conditions.
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Need advice on Section 354A?
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
354A. Where any registered non-profit organisation merges with any other registered non-profit organisation, the provisions of section 352 shall not apply if,—
(a) the other registered non-profit organisation has same or similar objects; and
(b) the said merger fulfils such conditions as may be prescribed.
Introduction
Finance Act 2026 inserted section 354A to exclude a qualifying merger of registered non-profit organisations from section 352 accreted-income tax.
The receiving organisation must have same or similar objects and the merger must meet prescribed conditions; the section does not list those conditions itself.
Key takeaways
Qualifying NPO merger
Section 352 does not apply where one registered NPO merges with another having the same or similar objects and all prescribed merger conditions are met.
Objects alone are insufficient
The statutory text also requires the prescribed conditions, which must be checked in the applicable rules.
When the Section 352 exclusion applies
Both entities must be registered non-profit organisations. The receiving organisation must have the same or similar objects, and the merger must fulfil the conditions prescribed under the law. Both requirements appear in Section 354A.
The statutory text does not itself enumerate those prescribed conditions. Check the applicable notified rules before relying on the exclusion for a proposed merger.
Merger review checklist
Confirm that both the merging and receiving entities are registered non-profit organisations. Compare their objects and record why they are the same or similar. Then identify each condition prescribed for the merger under Section 354A(b) and retain evidence of compliance before applying the Section 352 exclusion.
Section 354A does not set out the prescribed merger conditions. Their content and any required procedure need to be checked against the rules applicable to the proposed merger.
What this section changes
Section 354A specifies when the provisions of Section 352, which concerns tax on accreted income, do not apply to a merger. It does not state that every merger between registered non-profit organisations receives this treatment.
Step-by-step flow for applying Section 354A
- 1
Is a registered non-profit organisation merging?
- No: Section 354A is not relevant.
- Yes: Go to the next step.
- 2
Is the other party also a registered non-profit organisation?
- No: Section 354A does not help; Section 352 (Table: Sl. No. 8) may apply.
- Yes: Go to the next step.
- 3
Does the other organisation have the same or similar objects?
- No: The condition in Section 354A(a) fails; Section 352 may apply.
- Yes: Go to the next step.
- 4
Does the merger fulfil the prescribed conditions?
Section 354A(b) leaves the conditions to be prescribed; this section does not state them.
- No: Section 352 is not excluded.
- Yes: Section 352 (tax on accreted income) does not apply to the merger.
Practical checklist
Do
- Confirm both entities are registered non-profit organisations with same or similar objects.
- Locate the applicable prescribed merger conditions and document how each is met before relying on the section 352 exclusion.
Avoid
- Assume similar objects alone make the merger exempt from section 352.
Illustrative example
Worked example: two school trusts merge
Hypothetical facts (illustration only, not a real taxpayer): Trust A and Trust B are both registered non-profit organisations that run schools. Trust A merges into Trust B. Separately, Trust C, a registered trust running a hospital, considers merging with a private company.
A and B: both registered
The other party, Trust B, is a registered non-profit organisation.
A and B: objects
Both run schools, so they have the same or similar objects.
A and B: prescribed conditions
If the merger also meets the prescribed conditions, Section 352 does not apply to it.
Trust C
A company that is not a registered non-profit organisation is outside Section 354A, so the exclusion is not available; Section 352 (Table: Sl. No. 8) needs to be examined.
Outcome
- The A-B merger avoids tax on accreted income only if all of Section 354A's conditions, including the prescribed ones, are met.
- Similar objects alone are not enough.
Frequently asked questions
Does Section 352 apply when two registered non-profit organisations merge?
Under Section 354A, Section 352 does not apply if the other registered non-profit organisation has the same or similar objects and the merger fulfils the prescribed conditions. Both requirements must be checked.
Is having similar objects enough for the Section 354A exclusion?
No. Section 354A also requires the merger to fulfil such conditions as may be prescribed.
From when does Section 354A apply?
The Income Tax Department's consolidated Income-tax Act, 2025 notes that Section 354A was inserted by the Finance Act, 2026 with effect from 1 April 2026.
Need help applying this provision to your situation?
Get tax guidance for a non-profit organisation mergerLast updated 2026-10-10