New conditions for Merger of Registered Non-Profit Organisations

CBDT Introduces New Conditions for Merger of Registered Non-Profit Organisations under Income-tax Rules, 2026

The Central Board of Direct Taxes (CBDT), exercising its powers under Section 533 read with Section 352(4) [Table: Sl. No. 8] and Section 354A of the Income-tax Act, 2025, has notified the Income-tax (Eighth Amendment) Rules, 2026, vide Notification No. G.S.R. 961(E).

The amendment introduces a new Rule 189A in the Income-tax Rules, 2026, prescribing the conditions and compliance requirements applicable to the merger of registered non-profit organisations (NPOs) having identical or similar objectives.

The key provisions of the newly inserted Rule 189A are summarised below:

1. Eligibility Conditions for Merger

The merger of registered non-profit organisations must comply with the following conditions:

A registered NPO cannot merge with another NPO holding only provisional registration under Section 332.
Similarly, a provisionally registered NPO cannot merge with an NPO having regular registration under Section 332.
Both organisations must have the same or similar objectives.

2. Outstanding Tax Demands

The merging organisation must ensure that there are no outstanding tax demands, including tax, interest, penalties, fines or other dues arising from orders passed under the Income-tax Act, where such demands are not under appeal.

Where an appeal against an outstanding demand is pending, the merged organisation will be responsible for paying the demand once the appeal reaches finality.

3. Restriction on Modification of Objects

The objects of the surviving (merged) non-profit organisation cannot be modified for a period of five years from the end of the financial year in which the merger takes place.

4. Transfer of Assets and Liabilities

Upon merger, all assets and liabilities of the merging organisation will automatically become the assets and liabilities of the surviving organisation from the effective date of merger.

5. No Benefit to Related Persons

The merger must not result in any direct or indirect benefit to related persons of either the merging organisation or the surviving organisation, as specified under Section 337(1) [Table: Sl. No. 2] of the Income-tax Act, 2025.

6. Continuation of Tax and Other Compliance Obligations

The surviving organisation will assume all obligations of the merging organisation. These include:

Application of income: Compliance with the requirements of Section 341 relating to the application of income.
Accumulated income: Fulfilment of obligations concerning accumulated income under Section 342.
Specified income: Payment of tax under Section 334, wherever applicable, in respect of the specified income of the merging organisation.
Compliance with prescribed conditions: Ensuring that the conditions under Section 340 are not breached.
Investment of funds: Maintaining investments in accordance with the permitted modes prescribed under Section 350.
Additional income-tax: Payment of additional income-tax under Section 352 whenever the relevant liability arises.

7. Mandatory Intimation to Income-tax Authorities

The surviving organisation must intimate the jurisdictional Principal Commissioner or Commissioner about the merger by filing Form No. 112A.

The form must be submitted within one month from the end of the month in which the merger becomes effective.

The prescribed form is required to be furnished electronically using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).

8. Assessment and Other Proceedings

The amendment also clarifies how income-tax proceedings will be handled following the merger:

Any assessment, reassessment or other proceedings already initiated or completed against the merging organisation will be treated as proceedings against the surviving organisation.
In other cases, assessments, reassessments and other proceedings relating to the tax year in which the merger takes place (up to the merger date), as well as earlier tax years, will be carried out against the surviving organisation in the same manner and to the same extent as they would have been carried out against the merging organisation.

9. Audit of Books of Accounts

Both the merging organisation and the surviving organisation must get their books of accounts audited by an accountant, as defined under Section 515(3)(b) of the Income-tax Act, 2025, as on the date of merger.

10. Insertion of New Form No. 112A

Consequent to the introduction of Rule 189A, a new Form No. 112A is also proposed to be incorporated in Appendix III of the Income-tax Rules, 2026, immediately after Form No. 112.

Effective Date

The Income-tax (Eighth Amendment) Rules, 2026, shall come into force from the date of their publication in the Official Gazette.

Notification Reference: G.S.R. 961(E) – Income-tax (Eighth Amendment) Rules, 2026.

Also Read: “CBDT Notifies New Forms PAN CR-01 & PAN CR-02 for PAN Correction from 1 April 2026”

Also Read: FAQs and Guidance notes on Forms under Income-tax Rules, 2026

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