Section 343 · Special persons
Section 343 of the Income-tax Act, 2025 — Deemed Accumulated Income (15% Statutory Accumulation for Trusts & NPOs)
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVII
📜 What the law says — Section 343, Income-tax Act 2025
343. (1) The regular income, as reduced by the application of income as per the
provisions of section 341 and accumulated or set apart income under section
342, to the extent of 15% of regular income, shall be considered as deemed accumu-
lated income and where such deemed accumulated income is invested or deposited,
it shall be invested or deposited in any of the modes permitted under section 350.
(2) The deemed accumulated income under this section shall not be considered as
accumulated income for the purposes of section 342.
3. —Commercial activities by registered non-profit organisation
Business undertaking held as property.
In plain language
What Section 343 actually says
Section 343 of the Income-tax Act, 2025 deals with "deemed accumulated income" of a registered non-profit organisation (RNPO) — the successor to what practitioners under the old law called the "15% statutory accumulation" under Section 11(1)(a) of the Income-tax Act, 1961.
In plain words, a charitable trust or institution is expected to apply (spend) at least 85% of its regular income on its charitable/religious objects each year. Section 343 tells you what happens to the remaining slice of up to 15%. That 15% is automatically treated as "deemed accumulated income" — the trust does not need to spend it, does not need to file any option or notice for it, and is not taxed on it, provided the money is parked in a permitted investment mode.
The exact mechanism (two sub-sections)
- Section 343(1): Regular income, as reduced by the application of income and by accumulated income under Section 342, to the extent of 15% of regular income, is deemed to be accumulated income and must be invested or deposited in a mode permitted under Section 350.
- Section 343(2): This deemed accumulated income shall not be counted as "accumulated income" for the purposes of Section 342 — i.e. the 15% statutory buffer is kept separate from the special 5-year accumulation you claim under Section 342.
Who it applies to
- Registered non-profit organisations (RNPOs) — charitable trusts, societies, Section 8 companies and other institutions registered under the new regime (Sections 332 onwards) whose income qualifies for exemption.
- It applies automatically to every such RNPO — there is no separate election, no Form to file, no resolution required. This is why it is called "statutory" or "automatic" accumulation.
How the 15% is calculated
- Start with regular income of the RNPO for the tax year.
- Reduce it by income actually applied to charitable/religious objects in India.
- Reduce it further by amounts accumulated under Section 342 (the specific-purpose accumulation, up to 5 years, formerly Form 10 / Section 11(2)).
- Whatever remains, capped at 15% of regular income, is the deemed accumulated income under Section 343.
The 15% is measured on regular income, not on the unspent surplus. So the maximum shelter is 15% of the year's regular income — you cannot claim more than 15% simply because you spent very little.
The one condition you must satisfy
The only substantive condition is that this deemed accumulated income must be invested or deposited in a mode specified in Section 350 (read with Schedule XVI). Section 350 lists safe modes such as scheduled bank deposits, Post Office/Government securities, units of specified mutual funds, and similar approved instruments. If the 15% is not kept in a permitted mode, the protection under Section 343 can be lost and the amount can become taxable.
How it interacts with related sections
- Section 335/336 (85% application rule): Section 343 is the mirror image — the up-to-15% you are permitted to retain.
- Section 341 (deemed application): Lets an RNPO treat certain income as applied even if not actually spent (e.g. income received late). Section 343 sits on top of the application computation.
- Section 342 (specific accumulation, up to 5 years): A separate, discretionary accumulation for a stated purpose. Section 343(2) deliberately keeps the two buckets apart so you get both the 15% buffer and the Section 342 accumulation.
- Section 350 + Schedule XVI (investment modes): The compliance backbone — the 15% must sit in these approved instruments.
Practical implications
- The 15% gives every trust built-in operational flexibility — a permanent cushion that can be carried and invested without a spending deadline, unlike the 5-year Section 342 accumulation which must eventually be applied.
- No paperwork is needed to claim it, but you must be able to show the money is in a Section 350 mode.
- It reduces the risk of losing exemption in a year where a trust genuinely cannot spend 85%.
- Trustees should track the 15% buffer separately in the books and in the audit report to avoid it being confused with Section 342 accumulation.
💡 Example
Worked example 1 — basic 15% shelter. Shiksha Kalyan Trust, a registered NPO, has regular income of ₹1,00,00,000 in the tax year 2026-27. It applies ₹80,00,000 on running schools (education). Under the 85% rule it needed to apply ₹85,00,000, so it is short by ₹5,00,000. However, Section 343 automatically treats up to 15% of regular income — i.e. up to ₹15,00,000 — as deemed accumulated income. The unspent ₹20,00,000 (₹1 crore minus ₹80 lakh applied) is covered as follows: ₹15,00,000 is sheltered as deemed accumulation under Section 343 (must be invested per Section 350), and the balance ₹5,00,000 would need to be accumulated under Section 342 for a specific purpose, applied, or else it becomes taxable.
Worked example 2 — combining Section 343 and Section 342. Aarogya Seva Foundation has regular income of ₹50,00,000. It applies ₹35,00,000 (70%). It sets aside ₹7,50,000 under Section 342 for building a new clinic (a specific purpose, up to 5 years). Regular income (₹50,00,000) minus application (₹35,00,000) minus Section 342 accumulation (₹7,50,000) = ₹7,50,000 remaining. Section 343 shelters this up to 15% of ₹50,00,000 = ₹7,50,000. So the entire ₹7,50,000 is deemed accumulated income and, provided it is invested in a Section 350 mode, nothing is taxable. Note that the ₹7,50,000 Section 343 amount is kept separate and does not count against the Section 342 accumulation.
A short story. Meera, treasurer of a small orphanage trust in Jaipur, panicked one March because donations had arrived late and the trust had spent only about 82% of its income. Her CA calmed her down: "You are within Section 343 — up to 15% of your regular income is deemed accumulated automatically. Just make sure that unspent amount is sitting in the trust's fixed deposit with a scheduled bank, which is a Section 350 mode. No Form, no deadline — the law gives you this cushion every single year." Meera moved the surplus into an FD, noted it separately in the audit report, and the exemption held.
| Feature | Section 343 — Deemed accumulated income (15% statutory) | Section 342 — Specific accumulation |
|---|
| Maximum amount | Up to 15% of regular income | Balance income (after 85% norm), no fixed % |
| Time limit to apply | No spending deadline — can be retained | Must be applied within 5 years |
| Formality / election needed | None — automatic | Must declare purpose (statement/return) |
| Investment condition | Must be in a Section 350 permitted mode | Must be in a Section 350 permitted mode |
| Counts as "accumulated income" u/s 342? | No (Section 343(2)) | Yes |
| 1961 Act equivalent | Section 11(1)(a) — 15% accumulation | Section 11(2) — Form 10 accumulation |
Related sections
Section 335 — Income of a registered non-profit organisation Section 336 — Application of income (the 85% norm) Section 341 — Deemed application of income Section 342 — Accumulation of income for a specific purpose Section 350 — Permitted modes of investment and deposit Section 349 — Filing of return by non-profit organisations
Frequently asked questions
What is deemed accumulated income under Section 343?
It is up to 15% of a registered NPO's regular income that the law automatically treats as accumulated, so the trust need not spend it in that year. It remains exempt from tax provided it is invested in a mode permitted under Section 350.
Do I need to file any form to claim the 15% under Section 343?
No. Unlike the specific-purpose accumulation under Section 342, the 15% under Section 343 is automatic and requires no separate option, form or resolution. You only need to ensure the amount is held in a Section 350 investment mode.
Is there a time limit to spend the 15% deemed accumulated income?
No fixed spending deadline applies to the Section 343 amount, unlike the 5-year limit for Section 342 accumulation. It can be retained and invested, giving the trust a lasting operational cushion.
Can I claim both the Section 343 (15%) shelter and Section 342 accumulation in the same year?
Yes. Section 343(2) specifically states the deemed accumulated income is not counted as accumulated income for Section 342, so the two buckets are separate and can be claimed together.
What happens if the 15% is not invested in a Section 350 mode?
The protection under Section 343 can be lost. If the deemed accumulated income is not held in a permitted mode under Section 350, that amount may become taxable in the hands of the NPO.
Is the 15% calculated on total income or on the unspent surplus?
It is calculated as 15% of regular income, not on the unspent amount. So the maximum shelter is capped at 15% of the year's regular income regardless of how little you actually spent.
Which section of the old Income-tax Act, 1961 does Section 343 correspond to?
It corresponds to the 15% accumulation permitted under Section 11(1)(a) of the 1961 Act. The 2025 Act codifies this as 'deemed accumulated income' with an explicit Section 350 investment condition.
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 343)? Ask here 👇
Free · takes 20 seconds · our CA answers. No account needed.
No comments yet — be the first to ask. 👆
EaseValue