Introduction
The expression "charitable purpose" is fundamental to the taxation of charitable
trusts, institutions, societies and other non-profit organisations in India.
Under the Income-tax Act, 1961, Section 2(15) contains an inclusive definition
of "charitable purpose". The definition has been expanded over the years to
include activities such as yoga, preservation of the environment, and
preservation of monuments and places or objects of artistic or historic
interest, in addition to relief of the poor, education, medical relief and
advancement of any other object of general public utility.
From 1 April 2026, the Income-tax Act, 2025 applies to tax years covered by the
new Act. The corresponding definition is contained in Section 2(23) of the
Income-tax Act, 2025. It substantially carries forward the existing concept of
charitable purpose.
Under Section 2(15) of the Income-tax Act, 1961, "charitable purpose" includes:
1. Relief of the poor;
2. Education;
3. Yoga;
4. Medical relief;
5. Preservation of environment, including watersheds, forests and wildlife;
6. Preservation of monuments or places or objects of artistic or historic
interest; and
7. Advancement of any other object of general public utility (GPU).
The definition is inclusive and therefore covers the specified categories and
the statutory requirements applicable to each category.
The Income-tax Act, 2025 uses substantially the same categories. Section 2(23)
defines "charitable purpose" to include:
relief of the poor;
education;
yoga;
medical relief;
preservation of environment;
preservation of monuments or places or objects of artistic or historic interest;
and
advancement of any other object of general public utility.
Thus, the introduction of the Income-tax Act, 2025 has not fundamentally changed
the seven broad categories of charitable purpose.
1. Relief of the Poor
"Relief of the poor" is one of the recognised categories of charitable purpose.
It can cover activities directed towards the welfare and assistance of
economically or socially disadvantaged persons, depending upon the facts and the
objects and activities of the institution.
Examples may include:
assistance to persons in financial need;
food and clothing distribution;
shelters for destitute persons;
assistance to disadvantaged children;
welfare programmes for vulnerable persons;
assistance to indigent persons;
livelihood and rehabilitation programmes; and
other genuine poverty-relief programmes.
The expression should be interpreted in the context of the actual objects and
activities of the organisation.
2. Education
Education is expressly included in the statutory definition of charitable
purpose.
An institution established for genuine educational purposes may therefore fall
within the definition of charitable purpose, subject to compliance with the
other requirements of the Income-tax law.
However, merely describing an activity as "educational" does not automatically
confer income-tax exemption. The institution must satisfy the applicable
statutory conditions for the particular exemption being claimed.
The distinction between having an educational object and actually carrying on
qualifying educational activities can be important when examining registration
and exemption.
3. Yoga
Yoga is expressly included in the definition of charitable purpose.
This is an important addition to the older definition of charitable purpose.
An institution whose genuine objects and activities relate to yoga can therefore
fall within the definition of charitable purpose, subject to the other
conditions applicable to charitable institutions.
The Income Tax Department currently lists yoga separately among the recognised
categories of charitable purpose.
4. Medical Relief
Medical relief is another expressly recognised charitable purpose.
Activities may include genuine medical and healthcare services, depending upon
the nature of the institution and its actual activities.
Examples include:
hospitals and healthcare institutions;
dispensaries;
medical camps;
treatment and rehabilitation programmes;
assistance to persons requiring medical care; and
other genuine medical-relief activities.
Again, the mere existence of a medical object in the constitutional document is
not by itself sufficient. The institution must comply with the applicable
exemption and registration provisions.
5. Preservation of Environment
The definition now expressly includes preservation of the environment,
including:
watersheds;
forests; and
wildlife.
Environmental conservation organisations can therefore fall within the
definition of charitable purpose where their objects and activities genuinely
relate to preservation of the environment.
This category has become increasingly important for organisations working in
areas such as conservation, biodiversity, forest protection, wildlife
preservation and ecological restoration.
6. Preservation of Monuments and Objects of Artistic or Historic Interest
The definition also covers preservation of:
monuments;
places of artistic or historic interest; and
objects of artistic or historic interest.
Therefore, an institution established genuinely for preservation and
conservation of heritage can qualify within the statutory concept of charitable
purpose.
7. Advancement of Any Other Object of General Public Utility
The seventh category is "the advancement of any other object of general public
utility".
This is commonly referred to as the GPU category.
The category is intentionally broad, but it is subject to an important statutory
restriction where the organisation carries on activities in the nature of trade,
commerce or business or renders services in relation to trade, commerce or
business for consideration.
This restriction has been the subject of several amendments over the years.
Restriction on Commercial Activities by General Public Utility Organisations
The restriction under Section 2(15) applies specifically to the general public
utility category.
It does not apply in the same manner to the other specified categories such as:
relief of the poor;
education;
yoga;
medical relief;
preservation of environment; and
preservation of monuments or places or objects of artistic or historic interest.
Under the current Section 2(15), advancement of an object of general public
utility will not qualify as a charitable purpose where it involves:
an activity in the nature of trade, commerce or business; or
rendering services in relation to trade, commerce or business,
for a cess, fee or other consideration, irrespective of the manner in which the
income is ultimately used or retained.
There is, however, an important statutory exception where the prescribed
conditions are satisfied.
The 20% Receipt Limit for General Public Utility Activities
The present law contains a 20% limit.
The commercial or business-type activities referred to in the proviso will not
prevent the organisation from being treated as having a charitable purpose
where:
1. the activity is undertaken in the course of actually carrying out the
advancement of the object of general public utility; and
2. the aggregate receipts from such activity or activities during the previous
year do not exceed 20% of the total receipts of the trust or institution for
that previous year.
This 20% test is therefore a critical compliance requirement for organisations
whose charitable objects fall under the general public utility category.
Example
Suppose an institution has total receipts of ₹1 crore during a previous year.
If it is carrying on activities falling within the commercial-activity
restriction, receipts from those activities should generally not exceed:
₹1 crore X 20% = ₹20 lakh
subject to the precise statutory computation and facts of the case.
The test is based on the statutory concept of aggregate receipts from the
specified activities compared with total receipts.
Important: The 20% Test Does Not Apply to Every Charity
A common misconception is that every charitable institution is subject to the
20% commercial-receipt restriction.
That is incorrect.
The proviso to Section 2(15) specifically targets the advancement of any other
object of general public utility.
Consequently, the statutory restriction should not simply be applied to an
organisation merely because it charges fees or conducts an income-generating
activity.
The first question should always be:
Under which limb of Section 2(15) does the institution's charitable purpose
fall?
If the institution genuinely falls under relief of the poor, education, yoga,
medical relief, environmental preservation or preservation of
monuments/heritage, the special GPU commercial-activity proviso is not
applicable merely because the institution receives consideration for its
activities.
Nevertheless, other provisions governing charitable exemption, business
activities and application of income may still apply.
Section 11 contains a separate provision dealing with business undertakings
carried on by charitable trusts.
Under Section 11(4A) of the Income-tax Act, 1961, income from a business
undertaking may qualify for exemption where:
1. the business is incidental to the attainment of the objectives of the trust
or institution; and
2. separate books of account are maintained in respect of such business.
Therefore, it is important to distinguish between:
the definition of "charitable purpose" under Section 2(15); and
the conditions governing exemption of business income under Section 11.
The existence of a business activity does not automatically mean that a trust
loses its charitable character. The applicable statutory provisions must be
examined according to the nature of the organisation, its objects and its
activities.
Trade associations, chambers of commerce, industry associations and similar
organisations frequently claim that their objects constitute advancement of an
object of general public utility.
Such organisations need to examine the Section 2(15) restriction particularly
carefully where they:
charge membership fees;
provide services to members;
organise exhibitions or trade events;
provide consultancy or other services;
earn subscription or service income; or
conduct activities involving consideration.
The fact that an organisation has a charitable object does not, by itself,
resolve whether its activities fall within the statutory restriction.
The nature, purpose and manner of carrying on the activities and the statutory
20% test must be considered.
The important issue is not simply whether an institution earns money.
A charitable institution can have receipts and can conduct activities generating
income.
The crucial questions include:
What is the primary charitable object?
Which limb of Section 2(15) applies?
What activities are actually being carried on?
Is the activity genuinely connected with the charitable object?
Does the activity amount to trade, commerce or business?
Is consideration being received?
If the institution falls under the GPU category, are the statutory conditions
satisfied?
Does the aggregate receipt from the specified activities remain within the 20%
limit?
Are the separate requirements for exemption under Sections 11 and 12 satisfied?
Thus, earning income does not by itself destroy charitable status.
Charitable Purpose Does Not Automatically Mean Tax Exemption
Another important distinction is that "charitable purpose" and "income-tax
exemption" are not identical concepts.
Section 2(15) defines what constitutes a charitable purpose.
For an institution to obtain exemption of its income, it must also satisfy the
applicable provisions governing exemption.
For example, an institution claiming exemption under Sections 11 and 12 of the
Income-tax Act, 1961 generally needs to comply with the registration
requirements under Section 12AB and the conditions prescribed under the Act.
The Income Tax Department confirms that charitable or religious trusts seeking
exemption under Section 11 are subject to the registration framework.
Accordingly:
Charitable purpose + statutory registration + compliance with exemption
conditions = basis for claiming exemption
A charitable object alone does not automatically make all income tax-free.
Application of Income Under Section 11
For trusts and institutions registered under the applicable provisions,
exemption is subject to the conditions governing application and accumulation of
income.
Under the Income-tax Act, 1961, Section 11 generally permits exemption for
income from property held under trust for charitable or religious purposes to
the extent the statutory conditions regarding application and accumulation are
fulfilled.
The trust must therefore comply with the applicable requirements relating to:
application of income;
accumulation;
investments;
audit;
return filing;
registration;
specified violations; and
other statutory conditions.
The definition of charitable purpose under Section 2(15) is only one part of the
overall exemption framework.
Charitable Purpose Under the Income-tax Act, 2025
From 1 April 2026, the Income-tax Act, 2025 governs the tax years to which the
new legislation applies.
The corresponding definition is contained in Section 2(23).
It includes the same principal categories:
Relief of the poor, education, yoga, medical relief, preservation of
environment, preservation of monuments or places or objects of artistic or
historic interest, and advancement of any other object of general public
utility.
Therefore, the introduction of the new Income-tax Act has not fundamentally
altered the concept of charitable purpose.
However, trusts and institutions should refer to the Income-tax Act, 2025 and
the rules applicable from 1 April 2026 for current compliance rather than
relying exclusively on provisions of the repealed/replaced 1961 Act.
Important Changes Compared with the Old Law
The definition of charitable purpose has evolved substantially.
| Period / Issue | Position |
| Original concept | Relief of poor, education, medical relief and general public utility |
| 2008 amendment | Commercial-activity restriction introduced for GPU |
| 2015 amendment | 20% of total receipts test introduced for specified GPU activities |
| Later amendments | Yoga and environmental/heritage preservation expressly included |
| Present Section 2(15) | Seven broad categories with 20% GPU receipt restriction |
| From 1 April 2026 | Corresponding definition under Section 2(23), Income-tax Act, 2025 |
The current Section 2(15) expressly contains the 20% test, replacing the much older ₹25 lakh threshold that appeared in earlier versions of the provision.
A charitable trust, society or NGO should keep the following points in mind:
1. Charitable purpose is defined inclusively, not merely by the word
"charity" used in the trust deed.
2. The recognised categories include relief of the poor, education, yoga,
medical relief, environmental preservation, heritage preservation and
general public utility.
3. The commercial-activity restriction in Section 2(15) principally applies
to the GPU category.
4. For GPU organisations, specified commercial or business-type activities
must satisfy the 20% of total receipts condition.
5. The activity must also be undertaken in the course of actually carrying
out the advancement of the GPU object.
6. Earning income does not automatically destroy charitable status.
7. Separate provisions govern the exemption of business income under Section
11.
8. A charitable object alone does not automatically confer income-tax
exemption.
9. Registration and compliance requirements under the charitable exemption
provisions must also be satisfied.
10. From 1 April 2026, the corresponding definition is contained in Section
2(23) of the Income-tax Act, 2025.
Conclusion
The definition of "charitable purpose" has expanded significantly since the
Income-tax Act, 1961 was enacted.
The present law recognises seven broad categories:
Relief of the poor + Education + Yoga + Medical relief + Environmental
preservation + Preservation of monuments/heritage + Advancement of any other
object of general public utility.
The most important restriction applies to the general public utility
category. Where such an organisation carries on an activity in the nature of
trade, commerce or business, or provides services in relation to trade,
commerce or business for consideration, it must satisfy the conditions in
the proviso to Section 2(15), including the requirement that the aggregate
receipts from the specified activities do not exceed 20% of the total
receipts for the relevant previous year.
The introduction of the Income-tax Act, 2025 from 1 April 2026 does not
fundamentally change these seven categories; the corresponding definition is
now contained in Section 2(23).
Therefore, when determining whether an NGO, trust, society or other
institution has a "charitable purpose", it is essential to examine not only
its objects but also its actual activities, sources of receipts, commercial
activities, registration status and compliance with the conditions governing
exemption.
Note: This article provides general information on the statutory framework.
The tax treatment of a particular trust or institution depends on its
objects, activities, registration, receipts and the tax year involved. For
proceedings relating to earlier assessment years, the provisions of the
Income-tax Act, 1961 and the law applicable to those years must also be
considered.
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