Comparing Income Tax Rules for NGOs & Trusts 2026: Old vs New Rules

12A, 80G, 85% Rule, RNPO Registration & New Income-tax Act 2025 Explained

For years, NGOs, charitable trusts, societies, Section 8 companies and religious organisations have worked with familiar terms such as 12A, 12AB, 80G, Form 10A, Form 10AB and Form 10B.

From 1 April 2026, the Income-tax Act, 2025 and Income-tax Rules, 2026 bring a new framework for non-profit organisations.

The biggest change is not simply new section numbers. Several provisions that were spread across the old Act are now brought together under Part B of Chapter XVII, Sections 332–355, with eligible organisations referred to as Registered Non-Profit Organisations (RNPOs).

So, what has actually changed?

Let's compare the old and new rules in simple terms.

Old Income-tax Act vs New Income-tax Act for NGOs

The accounting period itself has not changed. April to March continues. What changes is the terminology and legal framework around it.

1. 12A / 12AB vs Section 332

This is probably the biggest change trustees will notice.

Earlier Act

NGOs and trusts generally dealt with:

12A / 12AA / 12AB → registration for tax exemption

Certain organisations also operated under Section 10(23C).

New Act

The registration framework has been reorganised under:

Section 332 → RNPO registration

The new framework brings specified trusts, societies and Section 8 companies into a more structured registration system.

In simple words

Old: 12A / 12AB

New: Section 332

However, existing organisations should not assume that their old registration suddenly becomes invalid. Transitional provisions under Section 536 protect existing valid registrations and approvals, subject to the new law.

2. 80G vs Section 354

80G is mainly about the tax deduction available to eligible donors.

Earlier Act

Section 80G → donor deduction approval

New Act

Section 354 → corresponding donor-deduction approval

The new framework also allows a consolidated application in specified cases.

Under Form 105, an organisation can apply for registration under Section 332 and the relevant donor-deduction approval under Section 354 together.

Remember

12A / Section 332 → organisation

80G / Section 354 → donor

These are two different benefits.

3. Form 10A / 10AB vs Form 104 / 105

The forms have also been reorganised.

Form 105 is particularly important because it covers regular registration and specified renewal, re-registration, conversion of provisional registration and changes in objects.

So, from 2026, NGOs should update old compliance checklists that still refer only to Forms 10A and 10AB.

4. 85% Rule: What Changed?

The familiar 85% application principle continues under the new Act.

Earlier

The 85% requirement operated primarily through the Section 11 framework.

New Act

The relevant provisions are now found mainly in Sections 336 and 341.

If the required amount is not applied during the year, the new framework continues mechanisms for deemed application, subject to the applicable conditions.

The new Act also provides Form 108 for exercising the deemed-application option electronically by the ITR due date.

Example

If an eligible trust has ₹10 lakh of relevant income:

The actual tax treatment depends on the organisation's circumstances and the applicable provisions.

5. 15% Deemed Accumulation

There is an important structural change here.

Earlier

The 15% accumulation concept existed within the Section 11 framework.

New Act

Section 343 specifically deals with deemed accumulation.

The amount must be invested in the permitted manner under Section 350. Otherwise, the applicable tax consequences may arise.

This makes proper accounting and investment tracking particularly important.

6. Accumulation Beyond the 15%

Trusts may need to accumulate income for a specific purpose.

Earlier

Section 11(2) and Form 10 were used for accumulation.

New Act

The corresponding framework is:

Section 342 → Form 109

The maximum accumulation period continues at 5 years.

The new framework also introduces dedicated procedures for changing the purpose of accumulation through Form 110 and Form 111.

7. Corpus Donations

Corpus donations continue to receive special treatment subject to conditions.

Earlier

Corpus provisions were primarily dealt with under Section 11(1)(d).

New Act

Corpus contributions are covered under Section 339.

The new Act also separately addresses deemed corpus donations under Section 340.

For practical accounting, trusts should clearly identify:

• Corpus donation

• Donor

• Date

• Amount

• Corpus direction

• Receipt number

• Investment/accounting treatment

Corpus and ordinary donations should not be casually mixed in the books.

8. Donation to Another NGO

This is an area trustees should pay attention to.

Under the new framework, when an RNPO donates to another RNPO, only 85% of the donation generally counts as application, while corpus donations to another RNPO count as nil application, subject to the applicable provisions.

This is an important change to consider when planning charitable grants or transfers between organisations.

9. Commercial Activities & Business Income

Charitable organisations can have activities that generate income, but the tax treatment depends on the nature of the activity.

The new Act restructures the rules around commercial/business activities under Sections 345–346.

This is particularly relevant for organisations working under the advancement of general public utility category.

Examples could include:

• Training programmes

• Publications

• Events

• Rent

• Services

• Other income-generating activities

Do not assume that every income source of a trust is automatically exempt.

Maintain proper records and have the activity reviewed by your CA or tax professional.

10. Audit & Reporting: Old vs New

The audit and donation reporting framework has also been simplified.

One notable change is that Form 112 replaces the earlier choice between Forms 10B and 10BB. For trustees, this means old audit checklists should be updated for Tax Year 2026-27 onwards.

11. Books of Accounts

Under the earlier law, requirements relating to books and records were spread across different provisions.

The new Act gives books and records a dedicated provision:

Section 347 → Books of account and records

This makes maintaining organised financial records even more important.

A trust should be able to clearly track:

Donations

• Donor

• Amount

• Receipt

• Payment mode

• Corpus status

Accounting

• Income

• Expenses

• Cash

• Bank

• Vouchers

• Transfers

Compliance

• Registration

• Audit

• Returns

• Donation reporting

• Supporting documents

12. Investment of Trust Funds

Earlier

Investment requirements were primarily governed by Section 11(5).

New Act

The corresponding provision is Section 350.

The permitted investment framework is largely carried forward, meaning trusts still need to pay attention to where accumulated funds are invested.

13. Violations & Tax Consequences

The new Act separates violations and their consequences more clearly.

This makes compliance failures more clearly structured within the new RNPO framework.

14. What Happens to Existing 12AB & 80G Registrations?

This is one of the most important questions for existing NGOs.

Existing valid registrations and approvals do not automatically become invalid simply because the new Act came into force.

The transition framework under Section 536 governs how existing registrations and approvals continue under the new law.

For applications from 1 April 2026

Fresh registration and approval applications use the new framework and new forms.

So the practical approach is:

Existing organisation → check transition provisions

New application → follow the 2025 Act and 2026 Rules

Old vs New: Quick Summary

What Should NGOs Do in 2026?

The new law does not mean that every trust needs to rebuild its compliance system from scratch. Instead, trustees should review five things:

1. Check registration

Confirm your existing registration/approval and understand how it transitions under the new Act.

2. Update your compliance calendar

Replace old form numbers and deadlines with the requirements applicable from Tax Year 2026-27.

3. Review accounting

Track donations, corpus funds, expenses, income application and accumulated funds properly.

4. Keep donor records complete

Especially where donor deductions and donation reporting are involved.

5. Work with your CA

The new Act is detailed. Software can organise records, but your CA or tax professional should determine the tax treatment applicable to your organisation.

How TrustSetu Helps NGOs & Trusts

Tax compliance starts with good records.

If donation receipts, cash transactions, bank entries and expenses are maintained separately in notebooks and spreadsheets, preparing reports can become unnecessarily difficult.

TrustSetu brings these workflows together:

• Member management

• Donor management

• Digital donation receipts

• Income ledger

• Expense ledger

• Cash book

• Bank book

• Receipt & payment vouchers

• Financial reports

• PDF and Excel exports

TrustSetu is built specifically for Indian trusts, NGOs and religious organisations, with trust-level data isolation and Indian financial-year based numbering.

For example:

Donation → Receipt → Income Ledger → Cash/Bank Book

can be connected instead of being entered repeatedly.

This helps trustees maintain cleaner records throughout the year and makes it easier to work with their CA during audit and tax compliance.

Frequently Asked Questions

What is an RNPO?

RNPO stands for Registered Non-Profit Organisation. Under the Income-tax Act, 2025, eligible trusts, societies, Section 8 companies and other specified organisations can fall under the new RNPO registration framework.

Is 12A still valid in 2026?

Existing registrations are subject to the transition provisions of the new Act. For new applications from 1 April 2026, Section 332 is the relevant registration framework.

Is 80G replaced?

The donor deduction framework has been reorganised under Section 354.

Does the 85% rule continue?

Yes. The 85% application principle continues under the new framework, primarily through Sections 336 and 341.

What is Form 105?

Form 105 is the new application for regular registration and specified approval/renewal situations under the RNPO framework.

What is the new audit form for NGOs?

Form 112 is the new common audit report form replacing the earlier Forms 10B and 10BB.

Does the financial year change?

No. The accounting period remains April to March. The new framework replaces the old Previous Year/Assessment Year terminology with the Tax Year concept.

Final Takeaway

The Income-tax Act, 2025 brings a more consolidated framework for India's non-profit sector.

For trustees, the important changes are:

12A / 12AB → Section 332

80G → Section 354

Form 10A → Form 104

Form 10AB → Form 105

Forms 10B / 10BB → Form 112

But the fundamentals have not disappeared.

Maintain proper accounts. Record every donation. Track income application. Protect supporting documents. Monitor registration. File on time.

The biggest advantage in 2026 will not simply be knowing the new section numbers.

It will be having clean financial records that make compliance easier.

Note: Tax laws and compliance requirements can depend on the organisation's structure and circumstances. This article is for general information and should not be treated as professional tax advice.