Chapter XVII - Special Provisions Relating to Certain Persons
Section 355
Section 355: interpretation clause for registered non-profit organisations
Section 355 opens the definitions used "for the purposes of this Part" - the set of provisions in the Income-tax Act, 2025 that deal with registered charitable and religious non-profit organisations (trusts, institutions and similar bodies registered under section 332 or the corresponding provisions of the Income-tax Act, 1961). It defines terms such as anonymous donation, donation, commercial activity, related person, specified asset, specified person and substantial interest that recur throughout this Part.
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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
For the purposes of this Part,–– (a) “anonymous donation” means any voluntary contribution referred to in section 2(49)(c), where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars, as may be prescribed; (b) “approval” means an approval under the second proviso to section 80G(5) of the Income-tax Act, 1961 or section 354; (c) “cancellation” includes withdrawal; (d) “donation” means any voluntary contribution received by a registered non-profit organisation from any person; (e) “commercial activity” means any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; (f) “registration” includes provisional registration, provisional approval or approval, as referred to in the second proviso to section 10(23C) or 12AB (1) of the Income-tax Act, 1961 and under section 332, but shall not include approval under the second proviso to section 80G(5) of the said Act or section 354; (g) “registered non-profit organisation” means any person having a valid registration under any specified provision and such registration has not been cancelled; (h) “related person” means any of the following persons:— (i) the author or the founder of the registered non-profit organisation; (ii) any person whose total contribution to such registered non-profit organisation, during the relevant tax year exceeds ₹ 100000, or, in aggregate up to the end of the relevant tax year exceeds ten lakh rupees, as the case may be; (iii) where such author, founder or person is a Hindu undivided family, a member of the family; (iv) any trustee or manager (by whatever name called) of the registered non-profit organisation; (v) any relative of any persons referred to in sub-clause (i), (iii) or (iv); (vi) any concern in which any of the persons referred to in sub-clauses (i), (iii), (iv) or (v) has a substantial interest; (i) “relative”, in relation to an individual, means— (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) any lineal ascendant (maternal or paternal) or descendant of the individual; (v) any lineal ascendant (maternal or paternal) or descendant of the spouse of the individual; (vi) spouse of a person referred to in sub-clause (ii), (iii), (iv) or (v); (vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual; (j) “residual income” means the total income without giving effect to the provisions of this Part, as reduced by regular income and specified income; (k) “specified asset” means any asset which is established to have been directly acquired by the specified person–– (i) out of its income of the nature referred to in Schedule II (Table: Sl. No. 1); (ii) during the period beginning from the date of its creation or establishment and ending on the date from which the registration under specified provision became effective, if the specified person has not been allowed any benefit under this Part or under sections 11 and 12 or section 10(23C)(iv) or (v) or (vi) or (via) of the Income-tax Act, 1961 during the said period, where provisions of the first proviso or the second proviso to sub-section 12A(2) or the eighth proviso to section 10(23C) of the said Act, are not applicable; (iii) during the period beginning from the date of its creation or establishment and ending on the date from which the registration under specified provision became effective due to the provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), where provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), of the Income-tax Act, 1961, are applicable; and (iv) which has been transferred to any other specified person within twelve months from the end of the month in which the dissolution takes place in respect of a case specified in section 352(4) (Table: Sl. No. 9); (l) “specified person” means any person which is registered under any specified provision at any time since its incorporation or creation; (m) “specified provision” means section 12A, 12AA or 12AB or section 10(23C) of the Income-tax Act, 1961 or section 332; (n) “substantial interest”, in relation to a person in a concern, means–– (i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than 20% of the voting power are, at any time during the tax year, owned beneficially by such person or partly by such person and partly by one or more of the other related persons; or (ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other related persons are entitled in the aggregate at any time during the tax year, to not less than 20% of the profits of such concern; (o) “value” means the value of any benefit or facility granted or provided free of cost or at concessional rate to any related person; (p) “wholly for charitable or religious purposes” shall mean wholly for charitable purposes or wholly for religious purposes or wholly for charitable and religious purposes.
Introduction
Section 355 defines terms for the registered non-profit organisation Part, including anonymous donation, registered organisation, commercial activity, related person and specified asset.
These definitions control charging, permitted activity, investment and violation rules across nearby sections.
Key takeaways
Part-specific meanings
These definitions govern the registered non-profit organisation provisions, rather than the entire Act.
Identity and relationship tests
The section distinguishes anonymous donations and defines who is a related person, including the statutory contribution thresholds.
Commercial activity and substantial interest
Trading or business activity can be commercial regardless of how income is used; substantial interest uses a 20% voting-power or profit-share test.
Anonymous donation, approval and cancellation
"Anonymous donation" means a voluntary contribution referred to in section 2(49)(c), where the person receiving it does not maintain a record of the identity (name, address and other prescribed particulars) of the donor.
"Approval" means an approval under the second proviso to section 80G(5) of the Income-tax Act, 1961, or under section 354 of this Act.
"Cancellation" includes withdrawal.
Donation and commercial activity
"Donation" means any voluntary contribution received by a registered non-profit organisation from any person.
"Commercial activity" means any activity in the nature of trade, commerce or business, or any activity of rendering a service in relation to trade, commerce or business, for a cess, fee or other consideration - regardless of how the income from that activity is used, applied or retained.
Registration and registered non-profit organisation
"Registration" includes provisional registration, provisional approval or approval as referred to in the second proviso to section 10(23C) or section 12AB(1) of the Income-tax Act, 1961, and under section 332 of this Act - but it does NOT include an approval under the second proviso to section 80G(5) of the 1961 Act or under section 354 of this Act.
"Registered non-profit organisation" means any person holding a valid registration under a "specified provision" that has not been cancelled.
"Specified provision" means section 12A, 12AA or 12AB, or section 10(23C), of the Income-tax Act, 1961, or section 332 of this Act.
"Specified person" means any person that is (or has been) registered under a specified provision at any time since its incorporation or creation.
Related person and relative
"Related person" of a registered non-profit organisation includes: the author or founder; anyone whose contribution to the organisation exceeds ₹1,00,000 in the relevant tax year, or ₹10,00,000 in aggregate up to the end of that year; a member of the family where the author, founder or such contributor is a Hindu undivided family; and any trustee or manager, by whatever name called. The definition also includes relatives of the author/founder, the relevant HUF-family member or a trustee/manager, and concerns in which those specified persons or relatives have a substantial interest. It does not list a contributor’s relative solely by reason of that contribution.
"Relative", for an individual, means: the individual's spouse; a brother or sister of the individual or of the spouse; any lineal ascendant or descendant (maternal or paternal) of the individual or of the spouse; the spouse of any such brother, sister or lineal ascendant/descendant; and any lineal descendant of a brother or sister of the individual or of the spouse.
Substantial interest and value
"Substantial interest" in a concern means: for a company, beneficial ownership (by the person alone or together with other related persons) of shares carrying not less than 20% of the voting power (excluding fixed-dividend shares); for any other concern, an entitlement (alone or with other related persons) to not less than 20% of the profits of that concern, at any time during the tax year.
"Value" means the value of any benefit or facility granted or provided free of cost, or at a concessional rate, to any related person.
Residual income, specified asset and charitable/religious purposes
"Residual income" means total income computed without giving effect to this Part, reduced by regular income and specified income.
"Specified asset" means an asset that a specified person is established to have directly acquired: out of income of the nature referred to in Schedule II (Table, Sl. No. 1); during the period between its creation/establishment and the date its registration under a specified provision became effective (in the specified circumstances set out in the section); or an asset transferred to another specified person within twelve months from the end of the month of dissolution in a case specified in section 352(4) (Table, Sl. No. 9).
"Wholly for charitable or religious purposes" means wholly for charitable purposes, or wholly for religious purposes, or wholly for both charitable and religious purposes.
Step-by-step flow for using the definitions in Section 355
- 1
Is the question under this Part (the special provisions for registered non-profit organisations)?
- No: Use the general definitions of the Act instead.
- Yes: Go to the next step.
- 2
Identify the term used in the provision
Section 355 defines terms such as anonymous donation, approval, commercial activity, registration, registered non-profit organisation, related person, relative, residual income, specified asset, specified person, specified provision, substantial interest and value.
- 3
For a related person, check each category in Section 355(h)
Author or founder; a contributor of more than ₹1,00,000 in the relevant tax year or more than ten lakh rupees in aggregate up to its end; HUF members where the author, founder or contributor is an HUF; trustees or managers; relatives of (i), (iii) or (iv); and concerns in which any of those persons has a substantial interest.
- 4
For a concern, test substantial interest
Under Section 355(n): for a company, shares (other than fixed-dividend shares) carrying not less than 20% of the voting power at any time in the tax year; for any other concern, entitlement to not less than 20% of the profits. Holdings of other related persons are combined.
- 5
Apply the definition back in the operative section
The definitions apply for the purposes of this Part only, so return to the section that uses the term.
Practical checklist
Do
- Check the Part-specific definition before applying a compliance rule.
- Document related-person connections and valuation where those definitions matter.
Avoid
- Use an informal meaning of anonymous donation or related person in place of the statute.
Illustrative example
Worked example: who is a related person
Hypothetical facts (illustration only, not a real taxpayer): A registered trust has a founder, Mr. Rao, and a managing trustee, Ms. Gill. A donor, Mr. Bose, gave ₹80,000 in the current tax year and ₹9,70,000 in earlier years. Ms. Gill holds equity shares carrying 25% of the voting power in a printing company. Mr. Bose's brother supplies goods to the trust.
Founder and trustee
Mr. Rao is a related person under Section 355(h)(i) and Ms. Gill under Section 355(h)(iv).
Donor
His contribution this year is ₹80,000, which does not exceed ₹1,00,000. His aggregate is ₹9,70,000 + ₹80,000 = ₹10,50,000, which exceeds ten lakh rupees, so he is a related person under Section 355(h)(ii).
Donor's brother
Sub-clause (v) covers relatives only of persons in sub-clauses (i), (iii) and (iv), not of a contributor under (ii). On these facts the brother is not a related person through Mr. Bose.
Printing company
Ms. Gill's 25% voting power is not less than 20%, so she has a substantial interest under Section 355(n)(i) and the company is a related person under Section 355(h)(vi).
Outcome
- Related persons: Mr. Rao, Ms. Gill, Mr. Bose and the printing company.
- Re-test contributions and holdings each tax year, since the tests look at the relevant tax year.
Frequently asked questions
Does Section 355 apply to every taxpayer?
No. Section 355 only defines terms "for the purposes of this Part" - the provisions of the Income-tax Act, 2025 dealing with registered charitable and religious non-profit organisations. It is not a general, Act-wide definitions section.
What contribution amount makes someone a 'related person' of a non-profit organisation?
A contributor becomes a related person if their contribution exceeds ₹1,00,000 in the relevant tax year, or exceeds ₹10,00,000 in aggregate up to the end of that tax year, as set out in the definition of "related person".
What voting power or profit share counts as a 'substantial interest'?
Not less than 20% of the voting power (for a company) or not less than 20% of the profits (for any other concern), held by the person alone or together with other related persons, at any time during the tax year.
Is a relative of a large donor also a related person?
Not through that donor alone. Section 355(h)(v) covers relatives of the author or founder, HUF members and trustees or managers (sub-clauses (i), (iii) and (iv)), but not relatives of a contributor who is related only under sub-clause (ii).
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Talk to our tax team about this sectionLast updated 10 October 2026