Rule 183 of the Income-tax Rules, 2026

Where this rule sits

Rule 183 gives effect to Section 337 and Section 355 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.

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What this rule does

The rule identifies when income of a registered non-profit organisation is treated as applied, directly or indirectly, for the benefit of a related person for the purposes of section 337 [Table: Sl. No. 2], and how much is so treated.

Sub-rule (1) lists ten circumstances, each concerning a dealing between the organisation and a related person during the tax year. Clause (a) — income or property lent to a related person for any period without adequate security. Clause (b) — the same, without adequate interest. Clause (c) — any land, building or other property made available for the use of a related person for any period without charging adequate rent or other compensation. Clause (d) — any amount paid by way of salary, allowance or otherwise out of the organisation's resources for services rendered to it, in excess of what may be reasonably paid for those services. Clause (e) — services or goods or both made available to a related person without adequate consideration or other compensation. Clause (f) — any share, security or other property purchased by or on behalf of the organisation from a related person for consideration which is more than adequate. Clause (g) — any such property sold by or on behalf of the organisation to a related person for consideration which is less than adequate. Clause (h) — income of the organisation, where the aggregate of the income exceeds Rs 1,000, diverted in favour of a related person. Clause (i) — property of the organisation, where the value of the property exceeds Rs 1,000, diverted in favour of a related person. Clause (j) — funds of the organisation invested, or continuing to remain invested, for any period during the tax year, not being a period before the 1st day of January, 1971, in any concern in which a related person has a substantial interest.

Sub-rule (2) fixes the amount: the income referred to in sub-rule (1) is the value of any benefit or facility granted or provided free of cost or at concessional rate to the related person. Sub-rule (3) gives "related person" the meaning assigned to it in section 355(h).

Why it is there

Section 337 [Table: Sl. No. 2] deals with income applied for the benefit of a related person, but a benefit conferred on an insider rarely appears as a payment described as such. It shows up as an interest-free loan, a rent-free building, an inflated salary, a purchase at more than value or a sale at less. The rule names those forms so that the enquiry is about substance, and sub-rule (2) measures the mischief by the value of the benefit rather than by the size of the transaction that carried it.

Who it applies to

• A registered non-profit organisation whose income or property is dealt with in any of the ten ways listed
• A related person within the meaning assigned in section 355(h), who receives the benefit or facility
• A concern in which a related person has a substantial interest, where the organisation's funds are invested
• The Assessing Officer computing the portion of income treated as applied for the benefit of a related person

The figures, and what each one turns on

What this means in practice

The measure is the benefit, not the transaction. Sub-rule (2) values what was granted free of cost or at a concessional rate, so on an interest-free loan of the organisation's funds it is the interest forgone that is caught, not the principal, and on a building let rent-free it is the rent forgone. Several clauses reach a state of affairs rather than an act: clauses (a), (b), (c) and (j) each catch property or funds that "is, or continues to be" lent, made available or invested for any period during the tax year, so an arrangement made years ago keeps biting in every year it subsists. Direction of the mispricing matters — clause (f) catches a purchase from a related person at more than adequate consideration and clause (g) a sale to one at less — so a single test of "market price" is not enough; the enquiry is which side gained. The two Rs 1,000 figures in clauses (h) and (i) are the only monetary thresholds in the rule; the other eight clauses carry none, so a small rent-free use is within them. "Related person" is not defined here and must be taken from section 355(h).

An example

A registered non-profit organisation lends Rs 20,00,000 of its funds to a related person for the whole tax year without charging interest, and separately lets a room in its building to the same person rent-free. Under clauses (b) and (c) both dealings are within sub-rule (1), and under sub-rule (2) the amount treated as applied for that person's benefit is the value of the benefit — the interest forgone on Rs 20,00,000 for the year plus the rent forgone on the room — not the Rs 20,00,000 itself. Had the loan been on adequate interest but without security, clause (a) would still have brought it in.

Where you meet this rule

You meet it in an assessment or a registration proceeding of a non-profit organisation, where the Assessing Officer works through loans to trustees and related concerns, use of premises, remuneration and related-party purchases and sales for the year.

The words themselves

What people get wrong

• Treating the whole loan or the whole sale price as the amount caught. Sub-rule (2) takes the value of the benefit or facility granted free of cost or at concessional rate.
• Looking only at transactions entered into during the year. Clauses (a), (b), (c) and (j) catch arrangements that continue during the tax year.
• Assuming an adequately priced loan is safe. Clause (a) catches a loan without adequate security even where adequate interest is charged.
• Applying the Rs 1,000 figure across the rule. It appears only in clauses (h) and (i), for diversion of income and of property.
• Testing a purchase and a sale by the same standard. Clause (f) is about paying more than adequate consideration and clause (g) about receiving less.
• Reading "related person" from general usage. Sub-rule (3) takes the meaning from section 355(h).