The Central Board of Direct Taxes (CBDT) has notified the Income-tax (Eighth Amendment) Rules, 2026 through Notification No. 139/2026, G.S.R. 961(E), dated 30 October 2026. The amendment inserts a new Rule 189A and a new Form No. 112A in the Income-tax Rules, 2026. Together they set out the conditions a registered non-profit organisation (NPO) must meet to merge with another NPO under sections 352(4) (Table, Sl. No. 8) and 354A of the Income-tax Act, 2025, adhering to the NPO merger rules 2026.
For trusts, societies and Section 8 companies, this is the first clear procedural framework for NPO mergers under the new law. The rules take effect from the date of publication in the Official Gazette.
The NPO merger rules 2026 are crucial for ensuring that all organizations involved in the merger comply with the specified legal requirements.
Why These NPO Merger Rules 2026 Matter
Many charitable organisations merge to pool resources, avoid duplicated overheads or consolidate programmes under one governance structure. Under the Income-tax Act, 2025, a merger that does not meet the prescribed conditions can expose the NPO to adverse tax consequences, including additional income-tax under section 352. Rule 189A turns those conditions into a defined checklist and adds a mandatory intimation to the tax department.
Who Can Merge With Whom
Rule 189A applies where a registered NPO merges with another registered NPO having the same or similar objects. The rules use two terms:
- Merging NPO: the organisation that merges into another.
- Merged NPO: the organisation into which the merging NPO merges.
Registration status is a gatekeeping condition:
- An NPO registered under section 332 cannot merge with an NPO provisionally registered under section 332.
- An NPO provisionally registered under section 332 cannot merge with an NPO registered under section 332.
In practice, both organisations must hold the same category of registration.
The Conditions Under Rule 189A at a Glance
1. Outstanding demand
- No tax, interest, penalty, fine or other sum may be payable on the merging NPO under any order passed under the Act, unless the demand is in appeal before an appellate authority.
- Where an appeal is pending, the merged NPO must pay the demand once the appeal attains finality.
2. Objects to remain stable
The objects of the merged NPO cannot be amended for five years from the end of the financial year in which the merger takes place.
3. Assets and liabilities
All assets and liabilities of the merging NPO become those of the merged NPO from the date of merger.
4. No benefit to related persons
The merger must not result in any direct or indirect benefit to a related person, as referred to in section 337(1) (Table, Sl. No. 2), of either the merging or the merged NPO.
5. Obligations pass to the merged NPO
All obligations of the merging NPO become obligations of the merged NPO, including:
- application of income as per section 341;
- application of accumulated income as per section 342;
- tax under section 334 on the specified income of the merging NPO;
- compliance with the conditions in section 340, which the merged NPO must ensure are not violated;
- investment of funds in the modes specified in section 350;
- payment of additional income-tax under section 352 whenever the liability arises.
6. Intimation in Form 112A
The merged NPO must intimate the jurisdictional Principal Commissioner or Commissioner in Form No. 112A within one month from the end of the month in which the merger takes effect. The form is filed electronically, using a digital signature or an electronic verification code.
7. Pending proceedings
- Where there is a merger, assessments, reassessments or other proceedings made or initiated on the merging NPO are deemed to have been made or initiated on the merged NPO.
- Otherwise, proceedings for the tax year of merger (up to the date of merger) and earlier years are made on the merged NPO as they would have been made on the merging NPO.
8. Audit as on the date of merger
Both organisations must get their books of account audited as on the date of merger by an accountant as defined in section 515(3)(b).
Form No. 112A: What It Contains
Form 112A is inserted in Appendix III, after Form No. 112. It has two parts:
- Part A: details of the merging NPO, including name, address, PAN, email, contact number and date of merger.
- Part B: the same details for the merged NPO, with other details as annexures.
The form carries a declaration by an authorised signatory of the merged NPO. It records that the trustees, governing body or management have passed a merger resolution on a stated date. It also contains undertakings beyond the Rule 189A text, including:
- the merged NPO will not claim depreciation on an asset whose cost the merging NPO has already claimed as application of income;
- contributions made to the merging NPO will count towards total contributions to the merged NPO for section 355(h)(ii);
- the section 340 conditions will not be violated, even by the merging NPO.
Annexures to be attached:
| Annexure | Particulars |
|---|---|
| A-1 | Trust deeds of both NPOs |
| A-2 | Registration granted to both NPOs |
| A-3 | Resolution passed by trustees, governing body or management highlighting the merger details |
| A-4 | Audited books of accounts of both NPOs as on the date of merger, and for the financial year immediately preceding the tax year of merger |
| A-5 | Reasons for the merger |
The form notes that some information will be pre-filled where possible.
Practical Observations for Trustees and Managers
These are our observations on the rules, not part of the notification.
- Do a registration check first. Confirm that both NPOs hold the same type of registration under section 332 before starting merger discussions.
- Clean up tax demands early. An outstanding demand that is not under appeal is a direct bar. Where an appeal is pending, the merged NPO takes on the liability, so the demand should be reflected in due diligence and merger terms.
- Plan the five-year lock on objects. Objects of the merged NPO cannot be amended for five years, so draft the post-merger objects clause carefully.
- Schedule the audit. Books of both organisations must be audited as on the date of merger. Fixing the merger date early gives the auditor time.
- Diarise the Form 112A deadline. It falls one month from the end of the month in which the merger takes effect. For a merger effective in any part of a given month, the intimation is due by the end of the following month.
- Inherit the history. The merged NPO inherits pending assessments, application and accumulation obligations, specified-income tax and potential additional income-tax, so past compliance of the merging NPO needs a thorough review.
- Watch related-person benefits. Any arrangement that could benefit a trustee, founder or other related person, directly or indirectly, can defeat the merger conditions.
Points to Watch
The rules do not define “same or similar objects” beyond that phrase, so the comparison of objects clauses will need a careful, documented basis. Also read Rule 189A together with sections 352 and 354A of the Income-tax Act, 2025 and any further clarification from CBDT.
How Sagar S Gupta & Co Can Help
Sagar S Gupta & Co, Chartered Accountants in Shivpur, Varanasi, assists trusts, societies and Section 8 companies with NGO compliance, including section 332 registration, audit and ongoing income-tax compliance. For a proposed merger, we can help with:
- eligibility review of both organisations against Rule 189A;
- due diligence on tax demands, pending proceedings and past compliance;
- merger-date audit coordination;
- drafting and filing of Form 112A with annexures;
- post-merger compliance planning.
To discuss a proposed NPO merger, contact Sagar S Gupta & Co.
Frequently Asked Questions
1. What is Rule 189A of the Income-tax Rules, 2026?
Rule 189A prescribes the conditions a registered NPO must satisfy to merge with another registered NPO having the same or similar objects, for the purposes of sections 352(4) (Table, Sl. No. 8) and 354A of the Income-tax Act, 2025.
2. When do the new rules come into force?
They come into force on the date of publication in the Official Gazette. The notification is dated 30 October 2026.
3. Can a registered NPO merge with a provisionally registered NPO?
No. Rule 189A bars a merger in either direction between an NPO registered under section 332 and an NPO provisionally registered under section 332.
4. What is Form No. 112A, and who files it?
It is the intimation of merger of registered NPOs. The merged NPO files it electronically with the jurisdictional Principal Commissioner or Commissioner, using a digital signature or an electronic verification code.
5. What is the deadline for filing Form 112A?
Within one month from the end of the month in which the merger comes into effect.
6. What happens if the merging NPO has an unpaid tax demand?
If the demand is not in appeal, it is a bar to the merger. If an appeal is pending, the merged NPO must pay the demand once the appeal attains finality.
7. Can the merged NPO change its objects after the merger?
Not for five years from the end of the financial year in which the merger takes place.
8. Is an audit required for the merger?
Yes. Both NPOs must get their books of account audited as on the date of merger by an accountant as defined in section 515(3)(b).
9. What documents must accompany Form 112A?
Trust deeds of both NPOs, their registration documents, the merger resolution, audited accounts of both as on the merger date and for the preceding financial year, and the reasons for the merger.
10. What happens to pending assessments of the merging NPO?
They are deemed to have been made or initiated on the merged NPO, and the Act applies accordingly. Proceedings for the year of merger (up to the merger date) and earlier years are also made on the merged NPO.
Disclaimer: This article is for general information based on Notification No. 139/2026-Income Tax (G.S.R. 961(E)) dated 30 October 2026 and does not constitute professional advice. Please consult a qualified Chartered Accountant before acting on any merger proposal.