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Case law › Income-tax Act 2025 › Chapter XVII › Section 341
Chapter XVIIwas s.11

Section 341 of the Income-tax Act, 2025

Section 341 — Application of income. Successor to s.11 of the 1961 Act.

Where this section sits

Section 341 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.

← Section 340  ·  Section 342 →

What this section does

Sub-section (1) allows two things as application of income by a registered non-profit organisation: any sum other than one falling in clause (b) applied for the charitable or religious purpose in India for which it is registered, where the sum is paid during the tax year, with sections 35(b)(i) and 36(4), (5), (6) and (7) applying to it; and 85% of the sum paid by way of donation to any other registered non-profit organisation.

Sub-section (2) adds two restoration cases. Clause (a) covers the amount invested or deposited back during the tax year in the modes permitted under section 350 maintained specifically for the corpus, provided this is done within five years from the end of the tax year in which the application from the corpus was made, and that application was made after 31 March 2021 with no violation of this Part or the corresponding provisions of the Income-tax Act, 1961. Clause (b) covers the amount repaid during the tax year towards a loan or borrowing, on the same conditions.

Sub-section (3) disallows three claims: depreciation or any other allowance on an asset whose acquisition was itself claimed as application in the same or any other tax year; a set off, deduction or allowance of excess application of any preceding year; and any sum paid as a corpus donation to another registered non-profit organisation. Sub-section (4) excludes application from corpus, loan or borrowing, accumulated income, specified income or deemed accumulated income from counting under sub-sections (1) and (2).

Sub-sections (5) to (8) work the shortfall. Where the regular income applied in India is less than 85% of regular income, the shortfall or any part of it may, at the organisation's option, be treated as deemed application. Sub-section (6) fixes when it must actually be applied: in the tax year in which the income is received or the year immediately succeeding it, where the shortfall arose because the income was not received during the year; and in the year immediately succeeding the year the income was derived, in any other case. Sub-section (7) requires the option to be exercised on or before the due date under section 263(1) for that tax year, in the prescribed form and manner, and sub-section (8) includes deemed application within the application under sub-section (1).

Sub-sections (9) and (10) treat certain capital gains as application. Where a capital asset held under trust wholly for charitable or religious purposes is transferred and the whole or part of the net consideration is used to acquire another such asset, the whole capital gain is deemed applied if the whole net consideration is used, and if only part is used, so much of the gain as equals the excess of the amount used over the cost of the transferred asset. For property held in part for such purposes, the appropriate fraction of the gain is deemed applied in full if the cost of the new asset is not less than the net consideration, and otherwise so much of the appropriate fraction as equals the excess of the appropriate fraction of the amount used over the appropriate fraction of the cost of the transferred asset. Sub-section (10) defines "appropriate fraction", "cost of transferred asset" — the cost of acquisition as ascertained for sections 72 and 73 plus improvement within section 90(1)(b) — and "net consideration" as the full value of consideration reduced by expenditure incurred wholly and exclusively in connection with the transfer.

Why it is there

A non-profit organisation is relieved of tax on the footing that its income goes to its objects, so the Act has to define what counts as going to its objects and when. The section does that on a payment basis, allows money temporarily taken from the corpus or from borrowings to be counted when it is put back, and stops the same spending being counted twice or carried between years. The 85% floor with a deemed application option is the accommodation for income not received or not spendable in time, bought at the price of spending it in a fixed later year.

Who it applies to

The figures, and what each one turns on

Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
WhatFigureThe condition on itWhere
Proportion of a donation to another registered non-profit organisation allowed as application85% of the sum paidDonation made to any other registered non-profit organisation; a corpus donation to another such organisation is not allowed at all under sub-section (3)(c)Sub-section (1)(b)
Threshold of regular income below which a shortfall arises85% of regular incomeRegular income applied towards charitable or religious purposes in India as per sub-sections (1) to (4)Sub-section (5)
Time within which corpus must be invested or deposited backWithin five years from the end of the tax year in which the application of income was made from the corpusInvestment or depositing back in the modes permitted under section 350 maintained specifically for the corpus; application from corpus made after 31 March 2021 with no violationSub-section (2)(a)(i)
Time within which a loan or borrowing must be repaidWithin five years from the end of the tax year in which the application of income was made from the loan or borrowingApplication from the loan or borrowing made after 31 March 2021 with no violationSub-section (2)(b)(i)
Earliest date of the original application for sub-section (2) to applyAfter the 31st March, 2021Applies to the application of income made from the corpus, or from the loan or borrowing, that is later restored or repaidSub-section (2)(a)(ii) and (2)(b)(ii)
Last date for exercising the deemed application optionOn or before the due date specified in section 263(1) for furnishing the return of income for that tax yearTo be exercised in such form and manner as may be prescribedSub-section (7)
Year by which a deemed application must actually be appliedThe tax year in which the income is received or the tax year immediately succeeding it, or the tax year immediately succeeding the year the income was derivedThe first where the shortfall is because the income was not received during the year; the second in any other caseSub-section (6)(a) and (b)

What this means in practice

Application is measured by payment during the tax year under sub-section (1)(a), so a liability provided for but unpaid does not count. A donation to another registered non-profit organisation is treated less generously than direct spending: only 85% of it is application, and if given as a corpus donation, sub-section (3)(c) disallows it altogether. The restoration provisions in sub-section (2) are a second chance, not a second deduction — the original application from corpus or borrowings is itself excluded by sub-section (4), and credit comes only when the money is put back within five years, and only if that original application was made after 31 March 2021 without violation. Sub-section (3)(a) is the double-counting rule that catches most organisations: an asset whose acquisition was claimed as application yields no depreciation afterwards, in that year or any other. The deemed application route is an option, dependent under sub-section (7) on being exercised in the prescribed form by the section 263(1) due date. On capital gains, the measure in sub-section (9)(a)(ii) is the excess of the amount utilised over the cost of the transferred asset, not the whole gain.

An example

Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.

A registered non-profit organisation has regular income of Rs. 1 crore in a tax year. It spends Rs. 60 lakh directly on its objects in India during the year and pays Rs. 20 lakh as a donation to another registered non-profit organisation, of which 85%, that is Rs. 17 lakh, counts under sub-section (1)(b). Its application is therefore Rs. 77 lakh against the 85% figure of Rs. 85 lakh, leaving a shortfall of Rs. 8 lakh. It may treat that Rs. 8 lakh as deemed application under sub-section (5) by exercising the option in the prescribed form on or before its section 263(1) due date, and must then actually apply it in the year fixed by sub-section (6). Had the Rs. 20 lakh been given as a corpus donation instead, sub-section (3)(c) would have allowed nothing for it.

Where you meet this section

In the organisation's own computation of application in its return and in the audit of its accounts, and in the option under sub-section (5), exercised in the prescribed form by the section 263(1) due date. It surfaces again in an assessment order disallowing a claimed application — most often depreciation on an asset already claimed as application, or a donation treated as corpus.

The words themselves

85% of the sum paid by way of donation made to any other registered non-profit organisation
Section 341(1)(b), Income-tax Act, 2025.
any sum paid as a corpus donation to any other registered non-profit organisation
Section 341(3)(c), Income-tax Act, 2025.
the shortfall, or any part thereof, at the option of the registered non-profit organisation, may be treated as deemed application
Section 341(5), Income-tax Act, 2025.

What people get wrong

What this replaced

The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.

See the full 1961 to 2025 concordance.

Rules that serve this section

Rules of the Income-tax Rules, 2026 that work section 341. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.

All of them are in the Rules 2026 index.

Circulars of the Board on this section

A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.

See every circular and notification on this section, or the circulars index.

Notifications that reach this section

A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance. We hold 697 in all; the 250 most recent are listed.

See every circular and notification on this section, or the notifications index.

Case law carried across

Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 341. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.

Explainers

Read with

What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.