TaxSaral
Section 351Charitable Trusts & NPOswas Sections 12AB & 13 in IT Act 1961

Specified Violations — When NPO Registration is Cancelled

Section 351 lists specific violations that can lead to cancellation of an NPO's registration — the most severe outcome for a charitable trust. Key violations include applying income for non-charitable purposes, benefiting specified persons, issuing fake donation receipts, not maintaining books, and deliberate non-compliance.

Who this applies to

All registered NPOs — any trust can face registration cancellation if it commits a specified violation.

Key Points

  • Applying income for non-charitable purposes or personal benefit of trustees — specified violation
  • Investing in non-permitted modes — specified violation
  • Applying funds outside India without approval — specified violation
  • Issuing false donation receipts or claiming receipts without actually receiving donations — specified violation
  • Carrying on commercial activities beyond the permitted threshold — specified violation
  • On cancellation: trust's income for that year is FULLY taxable at MMR with no exemption

Worked Example

1

Fake Donation Receipts — Worst Case Consequence

Scenario

A registered education trust issues ₹50 lakh worth of fake 80G receipts to donors who made no actual donations. The AO discovers this during assessment.

Calculation

Specified violation: Issuing false receipts ✓

Consequences:
1. Registration CANCELLED under Section 351

2. Trust income for violation year:
   Income:                              ₹40,00,000
   Exemption: DISALLOWED
   Tax at MMR (30%):                    ₹12,00,000

3. Accreted income tax (Section 352):
   FMV of all assets (say ₹2 crore):
   Exit tax (30%):                      ₹60,00,000

4. Prosecution risk:
   Criminal liability for trustees

5. For donors:
   80G claims disallowed + interest

Result

Fake donation receipts trigger registration cancellation, ₹72 lakh+ in tax, and criminal prosecution for trustees. This is one of the most serious offences under the IT Act.

Related Sections

Section 352Exit Tax on Accreted Income — NPO Dissolution or Conversion
Section 353Other Violations by Charitable Organisations
Section 332Registration of Charitable Trusts and NPOs
Section 337Specified Income — When NPO Funds Are Misused

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.