The regulatory landscape for trusts and non-governmental organizations (NGOs) in India has undergone significant changes in 2025. These updates aim to enhance transparency, streamline compliance, and ensure the effective utilization of resources within the sector. Below is an overview of the key developments:
1. Income Tax Reforms: Introduction of the Income Tax Bill 2025
The Income Tax Bill 2025 introduces substantial reforms affecting non-profit organizations:Centre For Advancement of Philanthropy+3Taxscan | Simplifying Tax Laws+3IndiaFilings+3
- Unified Definition: The term “registered non-profit organization” now encompasses entities registered under Sections 12A, 12AA, 12AB, or 10(23C) of the Income Tax Act, provided their registration remains valid .IndiaFilings
- Simplified Framework: The bill consolidates provisions into a structured format, reducing redundancy and simplifying compliance requirements .AURIGA ACCOUNTING PRIVATE LIMITED+2IndiaFilings+2Taxscan | Simplifying Tax Laws+2
- Application of Income: Clause 341 mandates that income must be applied exclusively for charitable or religious purposes in India, aligning with the organization’s objectives. Notably, only 85% of donations made to another registered non-profit qualify as an application of income, and corpus donations to other registered non-profits are excluded .Voice of CA
2. Extension of Registration Tenure for Small Trusts
Effective April 1, 2025, small trusts with approvals valid until March 31, 2026, must apply for renewal by September 30, 2025. Upon renewal, these trusts will receive a 10-year registration tenure, doubling the previous duration .The Times of India+6The Times of India+6taxupdates.cagurujiclasses.com+6
3. Updates to ITR-7 for Assessment Year 2025–26
The Income Tax Department has notified changes to ITR-7, pertinent to trusts and similar entities:Business Standard+1The Economic Times+1
- Capital Gains Reporting: Taxpayers must separately disclose capital gains arising before and after July 23, 2024, reflecting amendments introduced in the Union Budget 2024 .Business Standard
- Enhanced Disclosures: Entities are required to provide detailed information on foreign contributions, voluntary donations, accumulated income, and fund utilization, aiming to bolster transparency and accountability .The Economic Times+1The Times of India+1
4. Foreign Contribution Regulation Act (FCRA) Amendments
New regulations under the FCRA, effective January 1, 2025, impose stricter compliance measures:The Times of India
- Publication Restrictions: NGOs engaged in publications are prohibited from undertaking news-related activities to prevent the misuse of foreign contributions in influencing media .The Times of India+1The Economic Times+1
- Disclosure Requirements: Applicants for registration, prior permission, or renewal must furnish comprehensive details about individuals and affiliated organizations, including the nature of their association .The Times of India
5. Enactment of the Waqf (Amendment) Act, 2025
The Waqf (Amendment) Act, 2025, effective April 8, 2025, introduces significant reforms:Wikipedia
- Digitization and Registration: Mandates the digitization and centralized registration of all Waqf properties within six months to enhance transparency and prevent unauthorized transactions .Wikipedia
- Legal Clarity: Abolishes the ‘waqf-by-user’ doctrine and prohibits unilateral declarations of land as Waqf property, ensuring legal clarity and preventing unlawful claims .Wikipedia
- Professionalization of Waqf Boards: Incorporates professionals, including non-Muslim specialists, into Waqf Boards to modernize governance and ensure legal compliance .Wikipedia
Conclusion
The year 2025 marks a transformative period for trusts and NGOs in India, with regulatory changes emphasizing transparency, accountability, and streamlined operations. Organizations must stay abreast of these developments to ensure compliance and continue their vital contributions to society.