Section 351 Income Tax Act 2025: What Violations Can Lead to Cancellation of NGO Registration?
Section 351 identifies seven specified violations by registered non-profit organisations and establishes the inquiry, hearing and order procedure for deciding whether registration should be cancelled.
What are the seven specified violations under Section 351(1)?
The following conduct constitutes a specified violation for a registered non-profit organisation:
| Provision | Specified violation | Practical significance |
|---|---|---|
| 351(1)(a) | Income is applied otherwise than for the organisation's objects. | Use of income outside its registered purposes may trigger scrutiny. |
| 351(1)(b) | Commercial activity is carried out in contravention of Section 345. | Check whether the activity is incidental to the objects and whether separate books are maintained, as required by Section 345. |
| 351(1)(c) | Any part of total income is applied for private religious purposes that do not enure for the benefit of the public. | The provision distinguishes public benefit from private religious use. |
| 351(1)(d) | An organisation established after commencement of the Act for charitable purposes applies any income for the benefit of a particular religious community or caste, other than Scheduled Castes, Scheduled Tribes, backward classes, or women and children. | The precise statutory exceptions and the date of establishment matter. |
| 351(1)(e) | Activities are not genuine or are not carried out in accordance with any condition of registration. | Actual activities and registration conditions should be documented. |
| 351(1)(f) | The organisation fails to comply with another law referred to in Section 332(7)(a), and the relevant order, direction or decree finding non-compliance is undisputed or has become final. | An allegation alone does not meet the clause's express condition concerning the finding of non-compliance. |
| 351(1)(g) | The application under Section 332(1) contains false or incorrect information. | Accuracy and completeness of the registration application are essential. |
When can the Commissioner initiate a specified-violation inquiry?
Under Section 351(2), the Principal Commissioner or Commissioner must proceed where any of these three triggers arises:
- Section 351(2)(a): The authority notices one or more specified violations during a tax year.
- Section 351(2)(b): The authority receives a reference from the Assessing Officer under Section 270(13) for a tax year.
- Section 351(2)(c): The organisation is selected under the risk management strategy formulated by the Board for a tax year.
The authority then calls for documents or information from the organisation, or makes such inquiry as considered necessary, to determine whether a specified violation occurred. Selection for inquiry is not itself a finding that registration must be cancelled.
What orders can be passed after inquiry?
Cancellation where a specified violation is established
Under Section 351(2)(ii)(A), if satisfied that one or more specified violations have taken place, the Principal Commissioner or Commissioner may pass a written order cancelling registration for that tax year and all subsequent tax years. Before cancellation, the organisation must be afforded a reasonable opportunity of being heard.
Order not cancelling registration
Under Section 351(2)(ii)(B), if the authority is not satisfied about the occurrence of any specified violation, a written order not cancelling registration must be passed.
Communication of the order
Section 351(2)(iii) requires a copy of the written order to be forwarded to both the Assessing Officer and the registered non-profit organisation.
What is the statutory time limit for the order?
Section 351(3) requires the order under Section 351(2)(ii) to be passed before the expiry of six months calculated from the end of the quarter in which the Principal Commissioner or Commissioner first issues a notice calling for documents or information, or making an inquiry under Section 351(2)(i).
Thus, the clock is linked to the first inquiry notice, not merely the date when a potential violation is first noticed or a risk-based selection occurs.
Relevant statutory expressions and cross-references
Practical illustration
A registered charitable organisation spends funds on an activity outside its registered objects. During a tax year, the Commissioner notices this and issues the first notice requiring records in a particular quarter. The Commissioner may examine the expenditure, the organisation's objects and its explanation. If a specified violation is established, cancellation may follow only through a written order after a reasonable opportunity of hearing; otherwise an order not cancelling registration is required. In either case, the six-month limit is calculated from the end of the quarter in which the first inquiry notice was issued.
Compliance records to preserve: registration application and order, objects and governing documents, activity reports, expenditure vouchers, separate books for commercial activities, correspondence with regulators, and replies to departmental notices.
Frequently asked questions
Does every compliance error automatically cancel NGO registration?
No. Section 351 requires a specified violation and an inquiry leading to a reasoned written decision. A reasonable opportunity of being heard must precede cancellation.
Can false information in the registration application be a specified violation?
Yes. Section 351(1)(g) expressly covers false or incorrect information in the application under Section 332(1).
Does Section 351(1)(b) still expressly refer to Section 346?
No. The Finance Act, 2026 omitted "or 346" from that clause, effective 1 April 2026.
Can an organisation be selected for inquiry under a risk management strategy?
Yes. Section 351(2)(c) expressly provides for selection under a strategy formulated by the Board.
For which years can registration be cancelled?
If a specified violation is established, Section 351(2)(ii)(A) provides for cancellation for the relevant tax year and all subsequent tax years.
When does the six-month deadline begin?
It is calculated from the end of the quarter in which the first notice seeking documents or information, or initiating inquiry under Section 351(2)(i), is issued.
Official legislation and related provisions
Refer to the official consolidated Income-tax Act, 2025 (as amended by the Finance Act, 2026) for the statutory text. Related provisions include Section 332 (registration), Section 345 (commercial activity) and Section 346 (general public utility organisations).
Updated: 12 November 2026. General legal information; apply the statutory wording to the facts and current official notifications.