Rule 189A and Form 112A: CBDT sets conditions for merger of registered NPOs
The Central Board of Direct Taxes has notified the conditions a registered non-profit organisation must meet to merge into another without attracting tax on accreted income. Notification No. 139/2026 dated 30 October 2026 (G.S.R. 961(E)) issues the Income-tax (Eighth Amendment) Rules, 2026, which insert Rule 189A and a new Form No. 112A into the Income-tax Rules, 2026. Under Rule 189A, the merged organisation must file Form 112A with its jurisdictional Principal Commissioner or Commissioner within one month after the end of the month in which the merger takes effect. The amendment applies from the date of its publication in the Official Gazette.
The rules are made under section 533 read with section 352(4) (Table, Sl. No. 8) and section 354A of the Income-tax Act, 2025. For trusts, societies and section 8 companies that have been weighing consolidation, the notification turns a statutory relief into something they can plan around, because the relief only works once the conditions exist on paper.
How Rule 189A decides whether accreted income tax is payable on a merger
Section 352 charges additional income-tax at the maximum marginal rate on the accreted income of a specified person in the events listed in the Table to sub-section (4). Accreted income is the aggregate fair market value of total assets less total liabilities on the specified date, valued under the prescribed method and reduced by the portion attributable to specified assets and the liabilities relating to them. Sl. No. 8 of that Table deals with mergers. It catches a merger with an entity that is not a registered non-profit organisation, a merger with a registered organisation that does not have the same or similar objects, and a merger with a registered organisation that does have the same or similar objects where the merger does not satisfy the prescribed conditions. For a merger, both the specified date and the due date are the date of the merger, and the tax is payable within fourteen days of that date.
Section 354A, which applies from 1 April 2026, is the carve-out. Section 352 does not apply where a registered non-profit organisation merges with another registered non-profit organisation having the same or similar objects and the merger satisfies the prescribed conditions. Rule 189A supplies those conditions. A merger that meets every clause stays outside the accreted income charge; a merger that fails even one clause falls back into Sl. No. 8, with the full fair-value surplus of the merging organisation exposed to tax at the maximum marginal rate, payable within a fortnight of the merger date.
Conditions (a) to (l) under Rule 189A(1)
Rule 189A(1) has twelve clauses. Read together, they test the registration status of the two organisations, the tax position of the merging organisation, what happens after the merger and the audit trail on the merger date.
| Clause | Requirement | What to check before fixing the merger date |
|---|---|---|
| (a) and (b) | An organisation registered under section 332 cannot merge with one that is only provisionally registered under section 332, and a provisionally registered organisation cannot merge with a regularly registered one | The type of registration certificate held by each organisation |
| (c) and (d) | No demand may be payable by the merging organisation unless it is under appeal; a demand under appeal is paid by the merged organisation once the appeal becomes final | Outstanding demands of the merging organisation and whether each one is under appeal |
| (e) | The objects of the merged organisation cannot be amended for five years from the end of the financial year in which the merger takes place | Any planned change to the trust deed, memorandum or bye-laws of the surviving organisation |
| (f) | All assets and liabilities of the merging organisation become those of the merged organisation from the date of merger | Transfer documents and the asset and liability list as on the merger date |
| (g) | The merger must not give any direct or indirect benefit to a related person referred to in section 337(1) (Table, Sl. No. 2) | Payments, settlements or roles given to trustees, founders and their relatives as part of the merger |
| (h) | The merged organisation takes over the merging organisation's obligations under sections 341 and 342 (application and accumulation of income), section 334 (tax on specified income), section 340, section 350 (modes of investment) and section 352 when it applies | Unapplied accumulations, deemed application balances and investments of the merging organisation that the survivor inherits |
| (i) | Form 112A to be filed with the jurisdictional Principal Commissioner or Commissioner within one month after the end of the month in which the merger takes effect | Who will sign and verify the form for the merged organisation |
| (j) and (k) | Assessments and other proceedings against the merging organisation continue against the merged organisation; for the merger year up to the merger date and for earlier years, proceedings are taken against the merged organisation as if it were the merging organisation | Open assessments, reassessment notices and penalty proceedings of the merging organisation |
| (l) | The books of account of both organisations must be audited as on the date of merger by an accountant as defined in section 515(3)(b) | Engagement of the auditor for a cut-off audit of both organisations on the merger date |
Clause (h) carries the most practical weight. A merging trust with income accumulated under section 342 does not get a fresh start in the hands of the survivor: the merged organisation has to apply that accumulation for the original purpose and within the original period, and any breach is the survivor's problem. The same applies to investments outside the modes permitted by section 350.
Clause (l) means a merger effective in the middle of a financial year will need an audit of both organisations up to that date, on top of the regular annual audit. Effective dates aligned with a quarter-end or year-end will be cheaper to support.
Form 112A: contents, annexures and verification
Form No. 112A is an intimation of merger filed by the merged organisation. Part A asks for the name, address, PAN, email, contact number and the date of merger of the merging organisation. Part B asks for the same identification details of the merged organisation, with supporting documents attached as annexures. A person authorised by the merged organisation signs a declaration stating the date on which its trustees, governing body or management resolved to merge, and gives undertakings on the five-year bar on changing objects, on compliance with sections 341, 342, 334, 340, 350 and 352, on depreciation where the cost of an asset was already claimed as application of income, and on the computation of contributions under section 355(h)(ii).
Five annexures go with the form:
- A-1: trust deeds of both organisations
- A-2: registration certificates of both organisations
- A-3: the resolution approving the merger
- A-4: audited accounts of both organisations as on the date of merger and for the preceding financial year
- A-5: the reasons for the merger
Under Rule 189A(2), the form is filed electronically, verified with a digital signature or an electronic verification code generated under the standards laid down by the Director General of Income-tax (Systems).
Worked example: Form 112A due date and the five-year lock on objects
Illustration: Trust X, registered under section 332, merges into Trust Y, also registered under section 332 with similar educational objects. The merger takes effect on 18 December 2026.
- The month of merger ends on 31 December 2026. Form 112A is due within one month after that, so Trust Y must file it by 31 January 2027.
- The books of both trusts must be audited as on 18 December 2026, and the audited accounts as on that date and for financial year 2025-26 go into Annexure A-4.
- The merger falls in financial year 2026-27, which ends on 31 March 2027. Trust Y cannot amend its objects for five years from that date, that is, until 31 March 2032.
- Trust X has a demand of â¹3,40,000 for an earlier year pending before the Commissioner (Appeals). Condition (c) is still met because the demand is under appeal, and Trust Y pays it if the appeal is finally decided against the trust. Had the same demand been unpaid and not under appeal, the merger would fail condition (c) and Sl. No. 8 of section 352 would apply.
What Rule 189A does not settle
Form 112A is an intimation, not an application. The rule does not provide for an approval or an order from the Principal Commissioner or Commissioner before or after the merger, so whether the conditions were met will be tested only when the merged organisation's assessment, or a proceeding under section 352, is taken up. Organisations will need to keep the audit reports, the related-person analysis under clause (g) and the demand position on the merger date on file for that day.
The rule also does not prescribe how the merger is to be carried out. The mechanics continue to depend on the trust deed, the societies law that applies, or the Companies Act process for section 8 companies; Rule 189A only sets the tax conditions that the completed merger must satisfy. A merger between a regularly registered organisation and a provisionally registered one is barred outright by clauses (a) and (b), so an organisation still holding provisional registration has to wait for regular registration before it can merge with a fully registered counterpart.
The next date that matters for any merger already in the pipeline is the Form 112A deadline: a merger taking effect in November 2026 must be intimated by 31 December 2026, and the form has to be available on the e-filing portal in time for that.
Official source: View the official source document
