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Case lawIncome-tax Act 2025Chapter XVII › Section 342
Chapter XVIIwas s.11, s.13

Section 342 of the Income-tax Act, 2025

Section 342 — Accumulated income. Successor to s.11, s.13 of the 1961 Act.

Where this section sits

Section 342 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.

← Section 341  ·  Section 343 →

What this section does

Sub-section (1) lets a registered non-profit organisation accumulate or set apart part of its regular income for a tax year, provided it furnishes a statement to the Assessing Officer in the prescribed form and manner on or before the section 263(1) due date for the return for that year, stating the purpose and the period — which cannot exceed five years — of the accumulation. Sub-section (2) provides that an amount credited or paid out of accumulated or set apart income to another registered non-profit organisation is not treated as application of income. Sub-section (3) excludes from the five-year period any time during which the income could not be applied to its stated purpose because of a court order or injunction. Sub-section (4) requires the accumulated income to be invested or deposited in a mode permitted under section 350, or applied for the purposes stated in the prescribed form. Sub-sections (5) and (6) let the organisation apply to the Assessing Officer to change the purpose, and permit him — subject to sub-section (2) — to allow the income to be applied to other charitable or religious purposes in India that conform to its objects. Sub-section (7) allows the Assessing Officer, on an application in the prescribed form, to permit income to be applied to another registered non-profit organisation in the year the organisation is dissolved.

Why it is there

The provision lets a non-profit organisation hold back income for a stated purpose instead of having to spend it in the year of receipt, but only against a declared purpose and period and with the money parked in permitted investments. The bar in sub-section (2) exists so that accumulation is not turned into a means of passing money on to another organisation and counting it as application.

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
Maximum period of accumulationFive yearsThe purpose and the period must both be stated in the prescribed statement; time lost to a court order or injunction is excluded from this period342(1), with 342(3)
Deadline for the accumulation statementOn or before the due date specified in section 263(1) for furnishing the return of income for that tax yearThe statement is a condition of the accumulation, not a formality following it342(1)

What this means in practice

The statement has to be with the Assessing Officer by the section 263(1) return due date, and it must name both the purpose and the period, so the decision to accumulate cannot be taken retrospectively. The money then has to sit in a section 350 permitted mode or be applied to the stated purpose. If the purpose needs to change, apply to the Assessing Officer under sub-section (5); he can permit another charitable or religious purpose in India conforming to the organisation's objects, but not a route that would offend sub-section (2). Passing accumulated income to another registered non-profit organisation does not count as application — the only situation where the Assessing Officer can allow that is in the year of dissolution, on an application under sub-section (7).

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 with regular income of Rs. 3 crore in a tax year sets Rs. 1 crore apart to build a school block over four years, and files the statement of purpose and period in the prescribed form with the Assessing Officer before the section 263(1) due date for that year’s return. That statement is the condition, not a formality — furnished after the due date, the accumulation is not made out. The four years sit inside the five that sub-section (1) permits, and if a court injunction halts the building for eight months, sub-section (3) takes those months out of the count. Meanwhile the Rs. 1 crore must be invested or deposited in a mode permitted under section 350, and if the organisation instead pays part of it over to another registered non-profit organisation, sub-section (2) refuses to treat that payment as application of income at all.

Where you meet this section

In the prescribed statement filed with the Assessing Officer on or before the section 263(1) due date, and in the assessment of the organisation that tests whether the accumulation held — purpose, period, and the mode in which the money was parked. You meet the Assessing Officer again on an application under sub-section (5) to change the stated purpose, or under sub-section (7) to pass the income to another registered non-profit organisation in the year of dissolution.

The words themselves

The amount credited or paid by a registered non-profit organisation to any other registered non-profit organisation out of its income accumulated or set apart, shall not be treated as application of income.
Section 342(2), 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 342. 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 701 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 342. 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.