Rule 183: Measuring NPO benefits provided to related persons
Rule 183 addresses income applied directly or indirectly for the benefit of a related person by a registered non-profit organisation. It lists ten situations and measures the value of the benefit or facility provided free or at a concessional rate. Related person is defined by section 355(h).
Official notified Income-tax Rules, 2026Need advice on Rule 183?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
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Bare law
Rule 183 - Manner of computation of any portion of income applied by a registered non-profit organisation, directly or indirectly, for benefit of any related person
(1) For the purposes of section 337 [Table: Sl. No. 2], any income or part thereof, applied directly or indirectly for the benefit of any related person during the tax year, shall be computed in the manner as provided in sub-rule (2), in the following circumstances: — (a) if any part of the income or property of the registered non-profit organisation is, or continues to be, lent to any related person for any period during the tax year without adequate security; or (b) if any part of the income or property of the registered non-profit organisation is, or continues to be, lent to any related person for any period during the tax year without adequate interest; or (c) if any land, building or other property of the registered non-profit organisation is, or continues to be, made available for the use of any related person, for any period during the tax year without charging adequate rent or other compensation; or (d) if any amount is paid by way of salary, allowance or otherwise during the tax year to any related person out of the resources of the registered non-profit organisation for services rendered by that person to such registered non-profit organisation and the amount so paid is in excess of what may be reasonably paid for such services; or (e) if any services or goods or both are made available by any registered non-profit organisation to any related person during the tax year without adequate consideration or other compensation; or (f) if any share, security or other property is purchased by or on behalf of the registered non-profit organisation from any related person during the tax year for consideration which is more than adequate; or (g) if any share, security or other property is sold by or on behalf of the registered non-profit organisation to any related person during the tax year for consideration which is less than adequate; or (h) if any income of the registered non-profit organisation, where the aggregate of the income exceeds ₹ 1000, is diverted during the tax year in favour of any related person; or (i) if any property of the registered non-profit organisation, where value of the property exceeds ₹ 1000, is diverted during the tax year in favour of any related person; or (j) if any funds of the registered non-profit organisation are, or continue to remain, invested for any period during the tax year (not being a period before the 1st day of January, 1971), in any concern in which any related person has a substantial interest.
(2) The income referred to in sub-rule (1) shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to the related person.
(3) For the purposes of this rule, the expression ―related person‖ shall have the meaning assigned to it in section 355(h).
Rule breakdown
Identify related persons under the Act
Use the section 355(h) definition rather than assuming that only immediate family members are covered. Map the relationship before evaluating the transaction.
Maintain the organisation’s relationship and interest records alongside contracts and transaction approvals.
Review loans, premises, pay and supplies
The situations include loans without adequate security or adequate interest, use of property without adequate rent or compensation, excessive remuneration for services and goods or services supplied without adequate consideration.
Adequacy depends on the relevant transaction. Retain comparable terms, valuations, contracts and evidence of services instead of relying only on an internal approval.
Review transfers, diversions and investments
The rule also covers property purchased from a related person for more than adequate consideration, property sold for less than adequate consideration, the stated diversions of income or property, and funds invested in a concern in which a related person has substantial interest.
The ₹1,000 threshold appears in the income- and property-diversion clauses; it is not a general exemption for every related-person transaction in the list.
Value the actual benefit or facility
Sub-rule (2) measures the benefit or facility granted free or at a concessional rate. Keep the relevant value evidence and calculation rather than assuming every case equals the entire underlying asset or payment.
For example, a concessional use arrangement calls for analysis of the value of the benefit under the rule; the existence of a relationship alone does not supply the numerical amount.
Separate governance approval from tax treatment
Trustee or board approval and documentation help explain the transaction but do not override the statutory rules. Review existing arrangements as well as new ones, because the text covers some transactions that continue during the year.
Obtain case-specific advice where security, interest, remuneration or property pricing cannot be substantiated.
Key takeaways
Ten listed situations
Review the complete list rather than one transaction type.
Benefit value
Sub-rule (2) governs the measured amount.
Narrow ₹1,000 clauses
Do not extend those thresholds to the entire rule.
Practical checklist
- Identify related persons and their relevant interests.
- Retain evidence of adequate consideration and terms.
- Review continuing arrangements annually.
- Document the benefit calculation.
Avoid
- Do not treat internal approval as overriding the tax conditions.
- Do not apply one narrow threshold to every listed transaction.
FAQs
Is every related-person payment automatically measured at the full payment amount?
The rule measures the value of the free or concessional benefit or facility; apply it to the facts and the relevant listed circumstance.
Does ₹1,000 provide a general safe limit for all related-person dealings?
No. That threshold is stated in the income- and property-diversion clauses, not across all ten situations.
Can a continuing loan be relevant?
Yes. The loan clauses expressly cover amounts that are, or continue to be, lent during the tax year.
Glossary
- Related person
- The person defined in section 355(h), which Rule 183 expressly incorporates.