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Case lawIncome-tax Act 2025Chapter XVII › Section 355
Chapter XVIIwas s.2(15), s.11, s.12, s.13, s.115BBC, s.115TD, s.115TE, s.115TF

Section 355 of the Income-tax Act, 2025

Section 355 — Interpretation. Successor to s.2(15), s.11, s.12, s.13, s.115BBC, s.115TD, s.115TE, s.115TF of the 1961 Act.

Where this section sits

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

← Section 354A  ·  Section 356 →

What this section does

The section defines sixteen expressions for the purposes of this Part, and nothing in it operates on its own.

Clauses (a) to (g) cover the basic vocabulary. An "anonymous donation" is a voluntary contribution referred to in section 2(49)(c) where the recipient does not maintain a record of the identity of the contributor — name, address and such other particulars as may be prescribed. "Approval" means an approval under the second proviso to section 80G(5) of the Income-tax Act, 1961 or under section 354. "Cancellation" includes withdrawal. "Donation" is any voluntary contribution received by a registered non-profit organisation from any person. "Commercial activity" is any activity in the nature of trade, commerce or business, or of rendering a service in relation to any trade, commerce or business, for a cess, fee or other consideration, irrespective of the nature of use, application or retention of the income from it. "Registration" includes provisional registration, provisional approval or approval under the second proviso to section 10(23C) or section 12AB(1) of the 1961 Act and under section 332, but excludes approval under the second proviso to section 80G(5) of that Act or section 354. A "registered non-profit organisation" is a person holding a valid, uncancelled registration under any specified provision.

Clauses (h) and (i) build the related person net. A "related person" is the author or founder; any person whose total contribution during the relevant tax year exceeds Rs. 100000, or in aggregate up to the end of that year exceeds ten lakh rupees, as the case may be; a member of the family where the author, founder or contributor is a Hindu undivided family; any trustee or manager by whatever name called; any relative of those persons; and any concern in which any of them has a substantial interest. "Relative" is defined by a list of seven relationships running from spouse and siblings to lineal ascendants and descendants of the individual and of the spouse, their spouses, and lineal descendants of siblings of either.

Clauses (j) to (p) cover the computational and residual terms. "Residual income" is total income without giving effect to this Part, reduced by regular income and specified income. "Specified asset" is an asset established to have been directly acquired by a specified person in four situations, including out of income of the nature in Schedule II (Table: Sl. No. 1), during periods before registration became effective in the circumstances described, and an asset transferred to another specified person within twelve months from the end of the month of dissolution in a case under section 352(4) (Table: Sl. No. 9). A "specified person" is any person registered under any specified provision at any time since its incorporation or creation, and a "specified provision" is section 12A, 12AA or 12AB or section 10(23C) of the 1961 Act, or section 332. "Substantial interest" means beneficial ownership of shares carrying not less than 20% of voting power in a company, other than shares entitled to a fixed rate of dividend, at any time during the tax year, held alone or with other related persons, or in any other concern an entitlement, alone or in the aggregate with other related persons, to not less than 20% of the profits at any time during the tax year. "Value" is the value of any benefit or facility granted or provided free of cost or at a concessional rate to a related person, and "wholly for charitable or religious purposes" means wholly for charitable purposes, wholly for religious purposes, or wholly for charitable and religious purposes.

Why it is there

The Part taxes departures from non-profit behaviour — anonymous donations, commercial activity, benefits diverted to insiders, accreted income on dissolution — and each depends on a boundary being drawn precisely. The related person definition, with its contribution thresholds and its reach through relatives and concerns, is what makes the diversion rules workable, and the commercial activity definition is indifferent to how the income is afterwards used, so a trade does not become non-commercial merely because its profits go to the objects.

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
Contribution in a tax year that makes a contributor a related personExceeding Rs. 100000Total contribution by that person to the registered non-profit organisation during the relevant tax yearClause (h)(ii)
Aggregate contribution that makes a contributor a related personExceeding ten lakh rupeesTotal contribution in aggregate up to the end of the relevant tax yearClause (h)(ii)
Shareholding that constitutes a substantial interest in a companyNot less than 20% of the voting powerShares not entitled to a fixed rate of dividend, owned beneficially at any time during the tax year by the person, or partly by him and partly by one or more other related personsClause (n)(i)
Profit entitlement that constitutes a substantial interest in any other concernNot less than 20% of the profitsEntitlement of the person alone, or of the person and one or more other related persons in the aggregate, at any time during the tax yearClause (n)(ii)
Period for transfer of a specified asset after dissolutionWithin twelve months from the end of the month in which the dissolution takes placeTransfer to any other specified person in a case specified in section 352(4) (Table: Sl. No. 9)Clause (k)(iv)

What this means in practice

Two figures in clause (h)(ii) do different jobs and are joined by "as the case may be": a contribution exceeding Rs. 100000 in the relevant tax year makes the contributor a related person, and so, separately, does an aggregate exceeding ten lakh rupees up to the end of that year — so a donor who never crosses the annual figure can still be caught by the cumulative one. Once a person is a related person the reach widens, because clause (h)(v) and (vi) pull in relatives and any concern in which those persons hold a substantial interest, set at not less than 20% of voting power or profits, tested at any time during the tax year and aggregated across related persons. The commercial activity definition defeats the usual answer, applying irrespective of the use, application or retention of the income. The anonymous donation definition turns on record keeping rather than the donor's wishes. Registration and approval are kept apart throughout: clause (f) excludes the section 80G(5) and section 354 approvals, which clause (b) handles separately.

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 donor gives a registered non-profit organisation Rs. 40000 a year for many years, and by the end of a tax year his aggregate contributions come to Rs. 11 lakh. He has never crossed the Rs. 100000 annual figure, but the aggregate limb of clause (h)(ii) exceeds ten lakh rupees, so he is a related person from that year. A company in which he beneficially owns 25% of the voting power is a concern in which a related person has a substantial interest under clause (n)(i), so it too falls within clause (h)(vi), and any benefit or facility the organisation provides to it free or at a concessional rate is measured by its "value" under clause (o).

Where you meet this section

A taxpayer never encounters this section by itself; it is met inside the provisions it feeds — the treatment of anonymous donations, the tests of commercial activity and of benefits to related persons, and the computation of accreted income under section 352.

The words themselves

during the relevant tax year exceeds Rs. 100000, or, in aggregate up to the end of the relevant tax year exceeds ten lakh rupees, as the case may be
Section 355(h)(ii), Income-tax Act, 2025.
irrespective of the nature of use or application, or retention, of the income from such activity
Section 355(e), Income-tax Act, 2025.
where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution
Section 355(a), 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 355. 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 802 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 355. 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.