Section 354 · Special persons
Section 354 of the Income-tax Act, 2025 — Application for Approval to Receive Tax-Deductible Donations (Successor to Section 80G)
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVII
📜 What the law says — Section 354, Income-tax Act 2025
354. (1) A registered non-profit organisation or a person referred to in Schedule
VII (Table: Sl. No. 1) may, for the purpose of section 133(1)(b)(ii), make an
application for approval in such form and manner, as may be prescribed, to the
Principal Commissioner or Commissioner, subject to the following conditions:—
(a) it is not expressed to be for the benefit of any particular religious
community or caste;
(b) it is established in India for a charitable purpose and does not incur any
expenditure of an amount exceeding 5% of its total income during a tax
year which is of a religious nature;
(c) the instrument under which it is constituted does not, or the rules
governing it do not, contain any provision for the transfer at any time
of the whole or any part of its assets for any purpose other than a
charitable purpose;
(d) it maintains regular accounts of its receipts and expenditure;
(e) it prepares such statement for such period, as may be prescribed, and
deliver or cause to be delivered to the prescribed income-tax authority
or the person authorised by such authority such statement in such form
and verified in such manner and setting forth such particulars and within
such time, as may be prescribed;
(f) it delivers to the said prescribed authority, a correction statement for
rectification of any mistake or to add, delete or update the information
furnished in the statement delivered under clause (e) in such form and
verified in such manner, as may be prescribed; and
(g) it furnishes a certificate to the donor specifying the amount of donation
within such period from the date of receipt of the donation containing
the requisite particulars in manner, as may be prescribed.
(2) The application under sub-section (1) shall be made in respect of the cases
referred to in column B of the Table below within the time limit provided in column
C of the said Table and the Principal Commissioner or Commissioner, on receipt of
such application, shall follow the procedure provided in sub-sections (3) and (4),
and shall pass an order in writing within the time limit provided in column D and
approval, if granted, shall be valid for a period provided in column E of the said Table:
TABLE
Sl. Case
In plain language
What Section 354 actually does
Section 354 of the Income-tax Act, 2025 is the provision under which a charitable or religious organisation applies to the tax department for approval to receive donations that qualify for a deduction in the hands of the donor. In plain terms: this is the section that lets an NGO issue the receipt you attach to your return to claim a donation deduction. It is the direct successor to Section 80G(5) of the old Income-tax Act, 1961.
A crucial point people miss: under the 2025 Act the donor's actual deduction is granted by Section 133(1)(b)(ii), not by Section 354. Section 354 is only the gateway approval that makes the institution eligible so that its donors can then claim under Section 133.
Two separate steps — registration vs. donation approval
The 2025 Act splits what the old law bundled together:
- Section 332 — RNPO registration: makes the entity a "Registered Non-Profit Organisation" so that its own income is exempt.
- Section 354 — donation approval: a separate, additional application so that donations given to it become deductible for the donor.
Registration under Section 332 alone does not make donations tax-deductible. Only an approval under Section 354 does that.
Who can apply
- A Registered Non-Profit Organisation (RNPO) registered under Section 332 — public trusts, societies and Section 8 companies typically go this route.
- Certain entities listed in Schedule VII (specified funds and institutions) may apply directly under Section 354.
Key conditions for approval
Section 354(1) lays down conditions the institution must satisfy, broadly mirroring old 80G(5):
- Not for a particular religious community or caste — the objects must not be expressed to benefit any one religious community or caste.
- Charitable purpose in India — established in India for charitable purposes; religious expenditure is capped (broadly 5% of income, consistent with the earlier regime).
- Assets locked to charity — the governing document must not permit transfer of assets except for charitable purposes.
- Proper books — regular accounts of receipts and payments must be maintained.
- Statements & donor certificates — the institution must file the prescribed donation statements with the department and issue donation certificates to donors within the prescribed time, and file correction statements where needed.
Approval timelines and validity
The section is deliberately time-bound and distinguishes four situations:
- New institutions (not yet started activities): provisional-type approval, decision generally within 1 month, valid for 3 years.
- Institutions already carrying on activities: decision generally within 6 months, approval valid for 5 years.
- Provisional-approval holders moving to regular approval: 6-month window, 5-year validity.
- Renewal of expiring approvals: 6-month window, further 5-year validity.
Orders granting, rejecting or cancelling approval are issued in the new prescribed form (reported as Form No. 107). The officer may, before granting a regular (non-provisional) approval, call for documents to verify the genuineness of activities and compliance with other laws.
Practical implications
- Donors can rely on provisional approval: an NGO with only provisional Section 354 approval can still issue valid 80G-style receipts during the provisional period.
- Approval is a live status, not a one-time badge: persistent non-compliance (late statements, missing donor certificates) can lead to rejection or cancellation.
- Existing 80G approvals continue: valid old approvals run until expiry, after which renewal is under Section 354 — apply well before (broadly at least 6 months before) expiry.
💡 Example
Worked example 1 — a normal salaried donor. Ravi has gross total income of ₹12,00,000 and donates ₹50,000 to an NGO holding valid Section 354 approval in the "50% with qualifying limit" category. The qualifying limit is 10% of gross total income = ₹1,20,000. His donation of ₹50,000 is within that ceiling, so the full ₹50,000 qualifies; the deduction (carried into his return via Section 133) is 50% = ₹25,000. Note: donation deductions of this kind are available only under the old tax regime, not the default new regime.
Worked example 2 — cash limit trap. Meena donates ₹5,000 in cash to a Section 354-approved trust. Because cash donations above ₹2,000 do not qualify (a limit carried over from the 80G scheme), her deduction is nil. Had she paid the same ₹5,000 by UPI or cheque, it would have qualified. Always donate above ₹2,000 in non-cash mode.
A short story. A newly formed education trust in Jaipur wanted donors to get deductions from day one. Its founder registered as an RNPO under Section 332 and assumed that was enough — until a chartered accountant explained that donors could not claim anything until the trust also obtained approval under Section 354. The trust filed the Section 354 application, received provisional approval within a month, and immediately began issuing valid receipts. Three years later, having filed every donation statement on time, it converted to a full 5-year approval without a hitch.
| Situation of the institution | Decision window (indicative) | Validity of approval |
|---|
| New institution — activities not yet commenced (provisional route) | About 1 month | 3 years |
| Institution already carrying on activities | About 6 months | 5 years |
| Provisional holder converting to regular approval | About 6 months | 5 years |
| Renewal of an approval that is expiring | About 6 months | 5 years |
Related sections
Section 332 — Registration of a Non-Profit Organisation (RNPO) Section 133 — Deductions from gross total income, including donations Section 337 — Income and application conditions for RNPOs Section 355 — Interpretation / definitions for charitable trusts (Part B) Schedule VII — Specified funds and institutions eligible for donations Section 348 — Cancellation of registration/approval of an RNPO
Forms under this section
Income-tax forms (2025) prescribed under Section 354:
Frequently asked questions
Is Section 354 the same as the old Section 80G?
Yes, in effect. Section 354 of the Income-tax Act, 2025 is the successor to the approval provision in Section 80G(5) of the 1961 Act. It is the approval that lets an institution's donors claim a donation deduction.
If a trust is registered under Section 332, can donors claim a deduction automatically?
No. Section 332 registration only exempts the institution's own income. A separate approval under Section 354 is required before donations to it become deductible in the donor's hands under Section 133.
Can donors claim a deduction while the NGO has only provisional approval?
Yes. Provisional approval under Section 354 is valid for donor deductions, so the NGO can issue valid donation receipts during the provisional period (typically three years).
How long is a Section 354 approval valid?
Provisional/new-institution approval is generally valid for 3 years, while regular approval for institutions already carrying on activities is valid for 5 years and is then renewable for further 5-year blocks.
Does my old 80G approval stop working under the new Act?
No. Existing valid approvals continue until their expiry date. When they expire, renewal is applied for under Section 354, and you should apply well before expiry (broadly at least six months in advance).
Is there still a limit on cash donations?
Yes. Consistent with the earlier 80G scheme, cash donations above ₹2,000 do not qualify for the deduction; pay by cheque, UPI or bank transfer to be safe.
Can I claim a donation deduction under the new tax regime?
Generally no. Donation deductions of the 80G/Section 133 type are available under the old tax regime; taxpayers on the default new regime usually cannot claim them, so check your regime before donating for tax reasons.
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.
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