Two registered trusts or NGOs with similar charitable objects may want to combine their work. The tax question is whether a merger will trigger the additional income-tax rules that apply when a registered non-profit organisation (NPO) merges in a disqualifying way. Section 354A of the Income-tax Act, 2025 provides an exception where the other NPO has the same or similar objects and the prescribed conditions are met. CBDT has now prescribed those conditions in Rule 189A and introduced Form 112A to intimate the merger.
The change comes from CBDT Notification No. 139/2026, G.S.R. 961(E), dated 30 October 2026 Official ↗. The rule took effect on publication in the Official Gazette. This is a tax framework for an eligible merger; it does not itself complete the legal merger of two organisations or replace approvals required under their deeds and governing laws.
At a glance: The NPOs must have the same or similar objects, satisfy all twelve conditions in Rule 189A, audit both sets of books as at the merger date, and have the merged (receiving) NPO electronically furnish Form 112A within one month from the end of the month in which the merger takes effect.
What changes for a trust or NGO merger?
Section 352 deals with additional income-tax on accreted income in specified situations. As amended in 2026, its merger entry covers a merger into an entity other than a registered NPO, a registered NPO with different objects, or a same/similar-objects NPO where the prescribed conditions are not met. Section 354A says section 352 does not apply to a merger into another registered NPO with the same or similar objects if the prescribed conditions are fulfilled. Rule 189A sets out those conditions. This is a conditional tax treatment, not a blanket exemption from all income-tax obligations.
For example, imagine two registered education trusts with overlapping programmes. Their similar objects may satisfy one part of section 354A, but they still need to check their registration status, demands, audits, transfer of liabilities, related-person benefits and the intimation deadline. The legal method of combining the trusts must also be examined separately.
The 12 Rule 189A conditions
The notification labels the requirements (a) through (l). The following checklist keeps each condition separate so that nothing is lost in a shorter summary.
- Regular into provisional is barred — clause (a). An NPO registered under section 332 cannot merge into one provisionally registered under that section.
- Provisional into regular is barred — clause (b). The reverse direction is also barred. Confirm the actual registration status of both entities, rather than assuming that every registration certificate is regular.
- No unappealed outstanding demand — clause (c). For the merging (outgoing) NPO, no tax, interest, penalty, fine or other sum payable under an order may remain outstanding where that demand is not in appeal.
- Responsibility for appealed demand — clause (d). If an appeal is pending, the merged NPO must pay the merging NPO's outstanding demand when the appeal reaches finality. A pending appeal is not a waiver of the eventual liability.
- Objects locked for five years — clause (e). The merged NPO must not amend its objects for five years from the end of the financial year in which the merger occurs. For a merger in financial year 2026–27, that period runs from 31 March 2027 for five years.
- Assets and liabilities transfer — clause (f). All assets and liabilities of the merging NPO become those of the merged NPO from the date of merger. Reconcile bank accounts, grants, property, loans and restricted funds before setting that date.
- No related-person benefit — clause (g). The merger must not directly or indirectly benefit a related person described in section 337(1), Table, serial number 2, of either organisation. Scrutinise connected-party payments and asset transfers.
- Tax obligations continue — clause (h). The receiving NPO assumes all the outgoing NPO's obligations, including income application under section 341, accumulated income under section 342, tax on specified income under section 334, compliance with section 340, permitted investments under section 350, and additional income-tax under section 352 whenever a liability arises.
- Form 112A intimation — clause (i). The merged NPO must intimate its jurisdictional Principal Commissioner or Commissioner in Form 112A within one month from the end of the month in which the merger takes effect.
- Existing proceedings carry over — clause (j). An assessment, reassessment or other proceeding made or initiated against the merging NPO is deemed made or initiated against the merged NPO, with the Act applying accordingly.
- Other earlier-period proceedings carry over — clause (k). In cases outside clause (j), proceedings for the merger year up to the merger date and prior tax years can be made against the merged NPO to the same extent as against the merging NPO.
- Both books audited at merger — clause (l). Both the merging and merged NPO must have their books audited by an accountant within the definition in section 515(3)(b), as on the date of merger.
The form's declaration also asks the receiving organisation to undertake specific continuing treatments, including no double claim of depreciation where acquisition cost was already claimed as application, and counting contributions to the merging NPO for the calculation referred to in section 355(h)(ii). Read the declaration before the governing body signs the resolution and before the authorised signatory files.
Who files Form 112A, and when?
The merged NPO files, not the outgoing NPO. Rule 189A(2) requires electronic filing using a digital signature or electronic verification code. The form is an intimation to the jurisdictional Principal Commissioner or Commissioner; the notification does not describe it as a fresh application for registration or as a stand-alone approval of the merger.
The clock starts with the effective date of merger, not merely the resolution date. The deadline is one month from the end of the month in which the merger takes effect. If the merger is effective on 10 January 2027, January ends on 31 January and the stated one-month window ends on 28 February 2027. Record both dates clearly, and avoid leaving filing until the final day.
Form 112A asks for the names, addresses, PANs, email IDs and contact numbers of the merging and merged NPOs, the date of merger, and a declaration on behalf of the merged NPO. The declaration identifies the governing-body or trustee resolution and includes undertakings about the post-merger obligations.
Five enclosures listed in the form
The notification's Form 112A notes specify the following annexures under Part B, item 12:
| Annexure | Document or explanation |
|---|---|
| A-1 | Copies of the trust deeds of both NPOs. |
| A-2 | Copies of the registrations granted to both NPOs. |
| A-3 | The trustees', governing body's or management's resolution showing details of the merger. |
| A-4 | Audited books of both NPOs as at the merger date and for the financial year immediately preceding the tax year of merger. |
| A-5 | Reasons for undertaking the merger. |
The form notes that some information may be pre-filled where possible. Check pre-filled particulars against the certificates and the merger documents before verification.
Practical sequence before filing
- Compare objects and status. Read both governing documents and section 332 registration orders. Record why the objects are the same or similar and whether each registration is regular or provisional.
- Review demands and litigation. Obtain the outgoing NPO's order and appeal records. Resolve unappealed dues, and document the receiving NPO's potential obligation if an appeal is pending.
- Decide the legal route and effective date. Trustees or governing bodies should work through their deeds and applicable trust, society or company law. If a section 8 company is involved, obtain advice on its company-law process as well.
- Prepare the transfer and audit trail. Map every asset, liability, accumulated amount, investment, grant restriction and pending tax proceeding. Arrange both merger-date audits and collect the prior-year audited books required for A-4.
- Approve and document the merger. Pass the necessary resolutions, preserve the reasons for merger, and make sure the Form 112A declaration matches the actual approved terms.
- File, verify and retain proof. The receiving NPO should electronically file Form 112A within the prescribed window and retain its acknowledgment, annexures, audits and supporting resolutions.
Common mistakes to avoid
Counting from the resolution date. The rule uses the date the merger comes into effect. A resolution may be passed earlier; establish the legally effective date and use it consistently in the books and form.
Treating a pending appeal as a cancelled demand. Clause (d) makes the merged NPO responsible for payment once the appeal is final, to the extent a demand remains.
Collecting only the merger-date audit. Rule 189A requires the date-of-merger audits, while annexure A-4 additionally seeks both organisations' audited books for the financial year immediately preceding the merger tax year.
Assuming income-tax compliance completes the legal merger. Rule 189A addresses the tax conditions and intimation. The required legal instruments and approvals depend on the form and governing law of each entity.
Need help with a proposed merger?
TaxQue can help review the registrations, tax demands, audit records and Form 112A pack before the filing deadline. Email info@taxque.in, call 9311256088, or visit TaxQue.
