TaxSaral

Section 353 · was Sections 13 & 115BI in the 1961 Act

Other Violations by Charitable Organisations

Section 353 covers violations by NPOs that are less severe than Section 351 specified violations but still result in partial or full loss of exemption. These include failure to comply with audit requirements, missing return deadlines, applying income for purposes outside the trust deed, and other procedural non-compliance.

Who it applies to: Registered NPOs that commit procedural non-compliance or apply funds for purposes not strictly within their trust deed objects.

Key points

  • Applying income for objects not stated in the trust deed — the relevant income becomes taxable
  • Failure to file audit report or return by due date — accumulation benefits under Form No. 109 (earlier Form 10) are lost
  • Using trust funds for activities in a different geographic area not covered by the trust deed — scrutiny risk
  • Unlike specified violations (Section 351), these do not automatically cancel registration
  • The AO can issue show-cause notices and give the trust an opportunity to rectify before imposing tax

Worked example

Trust Spending on Activity Outside Its Trust Deed

A trust registered to 'provide medical relief in District X' spends ₹10 lakh on medical camps in District Y. Total income: ₹50 lakh.

Trust deed object: Medical relief in District X

Expenditure in District Y:             ₹10,00,000
  → NOT within stated objects ✗

Shortfall calculation:
  Required application (85% of ₹50L): ₹42,50,000
  Applied to District X:               ₹35,00,000
  Applied to District Y (not counted): ₹10,00,000

Shortfall (₹42.5L − ₹35L):            ₹ 7,50,000
Taxable at MMR (30%):                  ₹ 2,25,000

Result: The trust faces ₹2.33 lakh in tax (including cess) plus scrutiny risk. Fix: Amend the trust deed to include all districts/geographies where the trust operates, or obtain CIT approval before expanding geographic coverage.

Related sections

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.