Event Summary
On 21 August 2025, India enacted significant reforms to its tax framework when the new Income-Tax Act, 2025 received Presidential assent, replacing the six-decade-old 1961 law. The Act, passed by Parliament earlier in August, consolidates and simplifies provisions but also introduces changes with major implications for NGOs.
Among the most relevant provisions for civil society are the extension of NGO registration validity to ten years, the removal of the 15% mandatory investment rule for unspent income, and the increase of the reporting threshold for “substantial contributions” to ₹1 lakh. These measures reduce bureaucratic hurdles and provide greater financial flexibility, particularly for smaller NGOs. At the same time, the law introduces a flat 5% tax on anonymous donations, while maintaining exemptions for certain religious-cum-charitable trusts, and strengthens audit and oversight requirements. Officials from the Central Board of Direct Taxes have confirmed that new rules and FAQs will be issued by December 2025 to guide implementation.
While these reforms modernise compliance and financial management, concerns remain that grassroots NGOs, particularly those reliant on small or anonymous contributions, may face funding strains and uneven treatment compared to large charitable trusts.