The Central Board of Direct Taxes (CBDT), Ministry of Finance, Government of India, has issued Notification No. 139/2026 dated 30 October 2026 (G.S.R. 961(E)), notifying the Income-tax (Eighth Amendment) Rules, 2026, to prescribe specific conditions governing the merger of registered non-profit organisations under the Income-tax Act, 2025.
The amendment, issued in exercise of the powers conferred under Section 533 read with Sections 352(4) [Table: Sl. No. 8] and 354A of the Income-tax Act, 2025, inserts a new Rule 189A in the Income-tax Rules, 2026 and introduces Form No. 112A for mandatory intimation of mergers to the Income Tax Department.
The new provisions have come into force from 30 October 2026, being the date of publication in the Official Gazette.
New Rule 189A — Conditions for Merger of Registered Non-Profit Organisations
Under the newly inserted Rule 189A, a registered non-profit organisation may merge with another registered non-profit organisation having the same or similar objects, subject to compliance with the prescribed conditions.
Significantly, a regularly registered non-profit organisation under Section 332 cannot merge with a provisionally registered non-profit organisation under the same section, and vice versa. Thus, mergers between organisations holding different registration statuses are restricted.
Outstanding Tax Demands and Pending Appeals
The notification stipulates that the merging non-profit organisation must not have any outstanding tax, interest, penalty, fine or other sum payable pursuant to an order under the Income-tax Act where such demand is not under appeal before an appellate authority.
However, where an appeal is pending, the merged non-profit organisation shall be responsible for payment of the outstanding demand upon the appeal attaining finality.
This provision ensures that outstanding tax liabilities are not avoided merely by undertaking a merger.
Five-Year Restriction on Change in Objects
An important condition under Rule 189A provides that the objects of the merged registered non-profit organisation shall not be amended for five years from the end of the financial year in which the merger takes place.
Accordingly, the successor organisation must maintain continuity of its objects during the prescribed period.
Further, the merger must not result in any direct or indirect benefit to related persons referred to under Section 337(1) [Table: Sl. No. 2] of the Income-tax Act, 2025.
Transfer of Assets, Liabilities and Tax Obligations
The amendment provides that all assets and liabilities of the merging non-profit organisation shall become the assets and liabilities of the merged non-profit organisation from the date of merger.
The merged organisation shall also assume all statutory and tax-related obligations of the merging organisation, including application of income under Section 341, application of accumulated income under Section 342, payment of tax on specified income under Section 334, compliance with Section 340, investment of funds in prescribed modes under Section 350, and payment of additional income-tax under Section 352 wherever applicable.
Further, ongoing assessments, reassessments and other proceedings of the merging organisation shall be deemed to have been initiated or made against the merged organisation. The merged organisation shall also be subject to proceedings relating to earlier tax years and the pre-merger portion of the tax year in which the merger takes place, in accordance with Rule 189A.
Mandatory Filing of New Form No. 112A Within Prescribed Time Limit
In a significant compliance development, Rule 189A(1)(i) mandates filing of Form No. 112A to intimate the merger to the jurisdictional Principal Commissioner or Commissioner of Income Tax.
The intimation must be furnished within one month from the end of the month in which the merger comes into effect.
Form No. 112A is required to be filed electronically using a Digital Signature or Electronic Verification Code (EVC).
The newly prescribed form seeks details of both the merging and merged non-profit organisations, including their names, addresses, PANs, contact details and date of merger, together with the requisite declaration and supporting documents.
Mandatory Audit and Supporting Documents
Both the merging and merged registered non-profit organisations are required to get their books of account audited by an accountant as defined under Section 515(3)(b) of the Income-tax Act, 2025, as on the date of merger.
Additionally, Form No. 112A requires submission of specified annexures, including:
- Annexure A-1: Copies of trust deeds of both organisations.
- Annexure A-2: Copies of registration certificates of both organisations.
- Annexure A-3: Resolution passed by the trustees, governing body or management approving the merger.
- Annexure A-4: Audited books of account of both organisations as on the merger date and for the financial year immediately preceding the tax year of merger.
- Annexure A-5: Reasons for undertaking the merger.
The declaration accompanying Form No. 112A also includes undertakings relating to the five-year restriction on amendment of objects, continuity of application of income, restrictions on depreciation claims where the relevant cost has already been claimed as application of income, and the treatment of contributions for Section 355(h)(ii).
Significance for Charitable Trusts and Non-Profit Organisations
The notification establishes a detailed compliance framework for mergers of registered non-profit organisations under the Income-tax Act, 2025.
The framework is particularly significant for charitable trusts, registered institutions and other eligible non-profit organisations contemplating consolidation or restructuring, as it prescribes conditions relating to registration status, outstanding demands, continuity of charitable objects, statutory liabilities, audits and mandatory reporting.
Organisations proposing mergers must carefully evaluate the prescribed conditions, particularly the five-year restriction on changing objects, assumption of outstanding tax obligations, mandatory audit requirements and timely filing of Form No. 112A.
The notification does not provide an unconditional exemption for all mergers. Compliance with the applicable statutory provisions and the newly prescribed conditions remains essential.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/Amendment-of-the-Income-tax-Rules-2026-to-provide-conditions-which-a-registered-non-profit-organisation-shall-require-to-fulfil-for-merger.pdf
