Section 340 · Special persons
Section 340 of the Income-tax Act, 2025 — Deemed Corpus Donation for Renovation or Repair of Notified Places of Worship
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVII
📜 What the law says — Section 340, Income-tax Act 2025
340. Where the property of a registered non-profit organisation includes any
temple, mosque, gurudwara, church or other place notified under section
133(1)(b)(vi), any sum or sums received by such registered non-profit organisation
as donation for the purpose of renovation or repair of such temple, mosque, gurud-
wara, church or other place, may, at its option, be deemed as forming part of the
corpus under section 339, if it—
(a) maintains such corpus as separately identifiable;
(b) applies such corpus only for the purpose for which the donation was
made;
(c) invests or deposits such corpus in any of the modes permitted under
section 350; and
(d) does not apply such corpus for making donation to any person.
Application of income.
In plain language
What Section 340 is about
Section 340 of the Income-tax Act, 2025 gives registered non-profit organisations (NPOs) — the new law's umbrella term for charitable and religious trusts, societies and institutions — a special option. Normally, a donation is only treated as a corpus donation (a permanent capital contribution that is fully exempt) if the donor gives it with a specific written direction that it must form part of the corpus. That is the general rule in Section 339.
Section 340 relaxes this in one narrow, practical situation. Where an NPO owns a temple, mosque, gurudwara, church or other place notified under Section 133(1)(b)(vi) (a place of historic, archaeological or artistic importance, or a renowned public place of worship), and it receives money as a donation for the renovation or repair of that place, the NPO may, at its own option, deem that donation to be part of its corpus under Section 339 — even if the donor did not give any specific corpus direction.
Who it applies to
- Registered NPOs only — the institution must be registered under the 2025 Act's NPO regime (the successor to the 12A/12AB registration).
- The NPO's property must include a place of worship that is notified under Section 133(1)(b)(vi) (the successor to the old Section 80G(2)(b) notification). If the temple/mosque/gurudwara/church is not notified, Section 340 does not apply.
- The donation must be received specifically for renovation or repair of that notified place.
The four conditions you must satisfy
The word "may … at its option" means treating such a donation as corpus is a choice, not automatic. If the NPO opts in, it becomes bound by four cumulative conditions. Break any one, and the amount loses its corpus shelter.
- Purpose lock: the corpus must be applied only for the purpose for which the donation was made — i.e. renovation/repair of that specific place.
- No re-donation: the NPO must not use such corpus to make a donation to any other person or institution.
- Separately identifiable: the corpus must be maintained as separately identifiable — typically a dedicated bank account or clearly earmarked ledger, not mixed with general funds.
- Invest in permitted modes: the corpus must be invested or deposited only in the modes permitted under Section 350 (the successor to Section 11(5) — bank fixed deposits, government securities, notified bonds, etc.).
How it interacts with Sections 339, 350 and 133
- Section 339 (corpus donation): Section 340 amounts are deemed to fall within Section 339, so they get the same treatment — excluded from taxable income and not counted toward the 85% application requirement, as long as invested per Section 350.
- Section 350 (permitted investment modes): keeping the money in an approved mode is a live, continuing condition, not a one-time formality.
- Section 133(1)(b)(vi): supplies the definition of a "notified place." This is the same list of places for which donors can claim a deduction (the old 80G route).
- Application rule: when corpus is later spent on the renovation, that spending can itself be counted as "application" of income only if it is re-invested/topped-up back into corpus within the timeline the Act allows (broadly five years, mirroring the 2021-onward corpus rules).
Practical implications
- Cash-collection reality: Big temple/gurudwara renovation drives collect thousands of small offerings where getting a signed "corpus" letter from every devotee is impossible. Section 340 lets the trust treat these as corpus without individual directions.
- Full exemption, no 85% pressure: Because the sum is corpus, it does not enter the 85%-application test, so a multi-year renovation fund is not taxed just because it could not be spent in one year.
- Discipline required: The four conditions are strict. If the trust dips into the fund for salaries, general repairs elsewhere, or donates it onward, the amount can be treated as the income of the year in which the violation happens.
- This is the 2025 Act's version of Explanation 3A to Section 11(1)(d) of the 1961 Act — the substance is the same, only the section numbering and terminology have changed.
💡 Example
Worked example 1 — a temple renovation fund. The Shri Balaji Devasthan Trust owns a temple notified under Section 133(1)(b)(vi). In FY 2026-27 it runs a repair appeal and collects ₹80,00,000 from thousands of devotees, mostly in cash boxes, with no individual corpus letters. It opens a separate "Temple Renovation FD" account, parks ₹80,00,000 in a bank fixed deposit (a Section 350 mode), and spends only from it on the repair works. By exercising the Section 340 option, the entire ₹80,00,000 is deemed corpus and is excluded from taxable income. It also does not count toward the 85% application test, so the trust is not taxed even though the work will take three years.
Worked example 2 — a broken condition. Suppose in FY 2028-29 the same trust, having ₹20,00,000 still unspent in that renovation fund, transfers ₹5,00,000 of it to a different charity as a donation. This breaches the "no re-donation" condition. That ₹5,00,000 is deemed to be the income of FY 2028-29 and, absent shelter, is taxable at the applicable rate. The remaining ₹15,00,000, if kept and used correctly, stays protected.
A relatable story. Think of Gurpreet, treasurer of a historic gurudwara. When the roof needed urgent repair, the sangat donated generously through the golak (offering box) — no forms, no directions, just faith. Under the old rules Gurpreet feared the collection might be taxed as ordinary income because there were no corpus letters. Section 340 lets him tick a box: keep the money in a dedicated FD, spend it only on the roof, and the whole collection is treated as protected corpus. His only job now is discipline — separate account, permitted deposit, no diversion.
| Feature | Section 339 — Ordinary corpus donation | Section 340 — Deemed corpus donation |
|---|
| Donor's written corpus direction | Required | Not required |
| Who can use it | Any registered NPO | Only NPOs owning a place of worship notified under Sec 133(1)(b)(vi) |
| Purpose of donation | Any corpus purpose stated by donor | Renovation or repair of that notified place only |
| Nature of treatment | Corpus by donor's direction | Corpus by NPO's option ("may, at its option") |
| Kept separately identifiable | Required | Required |
| Invest in Sec 350 modes | Required | Required |
| Onward donation from corpus | Restricted | Expressly prohibited |
| Counted in 85% application test | Excluded | Excluded |
| 1961 Act equivalent | Sec 11(1)(d) | Explanation 3A to Sec 11(1)(d) |
Related sections
Section 339 — Corpus donation to a registered NPO Section 350 — Permitted modes of investment or deposit of funds Section 133 — Deduction for donations to certain funds and institutions (notified places of worship) Section 337 — Application of income by registered non-profit organisations Section 349 — Filing of return of income by registered NPOs Section 341 — Consequences of breach / income deemed on violation of corpus conditions
Frequently asked questions
What exactly is a deemed corpus donation under Section 340?
It is a donation received by a registered NPO for the renovation or repair of a temple, mosque, gurudwara, church or other place notified under Section 133(1)(b)(vi), which the NPO may choose to treat as corpus even without a specific corpus direction from the donor. Once opted in, it enjoys the same tax exemption as an ordinary corpus donation under Section 339.
Do we need a written corpus instruction from each donor?
No. That is the whole point of Section 340 — unlike Section 339, no donor direction is needed. The NPO exercises its own option to deem the renovation/repair donation as corpus, which is why it works for box collections and mass appeals.
Which places qualify — can any temple use this?
Only a temple, mosque, gurudwara, church or other place that is notified under Section 133(1)(b)(vi) (historic, archaeological or artistic importance, or a renowned public place of worship). An un-notified place of worship cannot use Section 340.
What are the conditions to keep the exemption?
Four conditions must all be met continuously: use the funds only for the stated renovation/repair, do not donate the corpus onward to any person, keep it separately identifiable, and invest or deposit it only in the modes permitted under Section 350.
What happens if we break a condition?
If any condition is violated — for example, diverting the fund or donating it to another entity — the amount is deemed to be the income of the NPO in the year the violation occurs and can become taxable, mirroring the consequence under the old Explanation 3A to Section 11(1)(d).
Is this different from the old Income-tax Act, 1961?
In substance it is the same rule that existed as Explanation 3A to Section 11(1)(d) of the 1961 Act (with investment under Section 11(5) and notification under Section 80G(2)(b)). The 2025 Act simply re-numbers these as Sections 340, 350 and 133 respectively.
Does a deemed corpus donation count toward the 85% application requirement?
No. Because it is treated as corpus, it is excluded from the income that must be applied (spent) to the extent of 85%, so a multi-year renovation fund is not taxed merely for remaining unspent, provided it stays invested in Section 350 modes.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
💬 Discussion & questions
0 comments · Ask anything about this — a Chartered Accountant or the community will reply.
Have a doubt about this (Section 340)? Ask here 👇
Free · takes 20 seconds · our CA answers. No account needed.
No comments yet — be the first to ask. 👆
EaseValue