Charitable Purpose under the Income-tax Act, 2025 and Section 2(15) of the Income-tax Act, 1961

The expression "charitable purpose" determines whether the objects and activities of a trust, society, Section 8 company or other non-profit organisation fall within the charitable framework of Indian income-tax law. From 1 April 2026, the Income-tax Act, 2025 applies to Tax Year 2026-27 and later years. For earlier years, the Income-tax Act, 1961 and the law applicable to the relevant assessment year continue to matter.

Meaning of "Charitable Purpose"

Under the earlier Income-tax Act, 1961, Section 2(15) contained an inclusive definition of "charitable purpose". The corresponding definition under the Income-tax Act, 2025 continues the same broad statutory concept.

Seven Broad Categories of Charitable Purpose

1. Relief of the poor
2. Education
3. Yoga
4. Medical relief
5. Preservation of the environment, including watersheds, forests and wildlife
6. Preservation of monuments, places or objects of artistic or historic interest
7. Advancement of any other object of general public utility (commonly called the GPU category)

1. Relief of the Poor

This limb can cover genuine activities aimed at assisting persons in economic or social need. Depending on the objects and actual work of the organisation, this may include food, clothing, shelter, livelihood assistance, rehabilitation, assistance to disadvantaged children, support for indigent persons and similar poverty-relief programmes.

2. Education

Education is expressly recognised as a charitable purpose. However, merely describing an object as educational is not enough to secure tax exemption. The institution's real objects, manner of operation and compliance with the applicable exemption provisions must be considered.

3. Yoga

Yoga is a separately recognised charitable category. An organisation genuinely established and operated for yoga-related charitable purposes may fall within the definition, subject to the other conditions of the tax law.

4. Medical Relief

Genuine medical and healthcare activities may qualify under this limb. Examples can include hospitals, dispensaries, medical camps, treatment programmes, rehabilitation services and assistance to persons needing medical care.

5. Preservation of the Environment

This category expressly extends to environmental preservation, including watersheds, forests and wildlife. Conservation, biodiversity protection, ecological restoration, forest protection and wildlife preservation may fall within this limb where the objects and activities are genuinely directed to those purposes.

6. Preservation of Monuments and Heritage

Preservation of monuments, places and objects of artistic or historic interest is also recognised. Organisations genuinely engaged in heritage conservation may therefore fall within the charitable-purpose definition.

7. Advancement of Any Other Object of General Public Utility

The general public utility category is broad, but it has a special statutory restriction concerning activities in the nature of trade, commerce or business, and services connected with trade, commerce or business that are carried on for a cess, fee or other consideration.

The correct analysis is not simply whether the organisation earns money. The relevant questions include the dominant charitable object, the nature of the activities actually carried on, the connection between those activities and the stated object, the existence of consideration, and whether the statutory receipt limit is met.

The 20% Receipts Test for General Public Utility Activities

For an organisation falling under the GPU limb, specified commercial or business-type activities do not automatically destroy charitable character if the statutory conditions are satisfied. In particular, the activity must be undertaken in the course of actually carrying out the advancement of the general public utility object, and the aggregate receipts from the specified activities must remain within the statutory percentage limit.

Example: If total receipts are ₹1 crore, 20% is ₹20 lakh. The precise tax result still depends on the statutory language applicable to the relevant year and the facts of the organisation.

The 20% rule does not apply identically to every charity

The special GPU restriction should not be mechanically applied to an organisation merely because it charges fees or receives consideration. The first question is which charitable limb applies. Relief of the poor, education, yoga, medical relief, environmental preservation and heritage preservation are distinct statutory categories. Other provisions governing exemption, application of income, business income and prohibited benefits may nevertheless apply.

Business or Income-Generating Activity

A charitable institution can receive income and may, in appropriate circumstances, conduct an activity that produces revenue. Under the earlier Act, Section 11(4A) separately dealt with business income of charitable or religious trusts where the business was incidental to the attainment of the organisation's objectives and separate books of account were maintained.

Accordingly, the definition of charitable purpose and the exemption of income are separate questions. An organisation may have a charitable object yet fail an exemption condition, or may conduct a revenue-generating activity without automatically ceasing to be charitable.

Trade, Industry and Professional Associations

Chambers of commerce, trade bodies, professional associations and industry organisations commonly rely on the general public utility limb. They should review membership fees, exhibitions, trade events, subscriptions, consultancy, member services and other consideration-based activities carefully against the applicable statutory conditions.

Charitable Purpose Does Not Automatically Mean Tax Exemption

A charitable object by itself does not make all income tax-free. Registration or approval, application or accumulation of income, permitted investments, audit, return filing, donation reporting and other compliance conditions may apply.

For Tax Year 2026-27 onward, the Income-tax Department's current framework under the Income-tax Act, 2025 includes registration of non-profit organisations under Section 332 and approval connected with eligible donations under Section 354. The Department's current Form 105 process is used for specified regular registration and/or approval applications under these provisions.

For periods governed by the Income-tax Act, 1961, the relevant registration and exemption provisions applicable to that year, including the legacy Section 12A/12AB framework where applicable, continue to be relevant.

Income-tax Act, 2025: Current Position from 1 April 2026

The Income-tax Act, 2025 applies to Tax Year 2026-27 and later years. The legislation substantially carries forward the recognised concept of charitable purpose while reorganising and renumbering the statutory framework.

Practical Checklist for Trusts, Societies and NGOs

• Identify the correct charitable-purpose category from the organisation's governing documents and actual activities.
• For GPU organisations, examine consideration-based activities and the applicable receipt threshold carefully.
• Do not assume that earning income by itself destroys charitable status.
• Keep registration or approval valid under the law applicable to the relevant tax year.
• Maintain books and records required for any incidental business or other regulated activity.
• Comply with application, accumulation, investment, audit, return and donation-reporting requirements that apply to the organisation.
• For disputes or proceedings involving earlier years, apply the Income-tax Act, 1961 and the amendments effective for those years.
• For Tax Year 2026-27 onward, use the Income-tax Act, 2025, Income-tax Rules, 2026 and current e-filing forms.

Frequently Asked Questions

Is every NGO automatically a charitable institution for income-tax purposes?

No. The organisation's legal objects and its actual activities must fall within the statutory charitable framework, and separate registration, exemption and compliance requirements must also be met.

Can a charitable organisation charge fees?

Charging a fee does not by itself decide the issue. The relevant charitable limb, the nature and purpose of the activity, the applicable commercial-activity restrictions and the exemption provisions must all be examined.

Does the 20% limit apply to schools and hospitals?

The special 20% commercial-receipts restriction associated with the general public utility limb should not be automatically extended to the separate statutory categories of education or medical relief. Other tax conditions can still apply.

Which law should be checked now?

For Tax Year 2026-27 onward, consult the Income-tax Act, 2025 and the current Income-tax Rules and e-filing guidance. For earlier assessment years, consult the Income-tax Act, 1961 as it applied to the relevant year.

Disclaimer: This page provides general information. The tax treatment of a particular trust, society, Section 8 company or other institution depends on its objects, actual activities, registration or approval, receipts and the tax year involved. For litigation, assessment or compliance relating to an earlier year, the law applicable to that year should be checked separately.