Site navigation

A registered non-profit organisation that provides medical relief proposes to run a pharmacy as a commercial activity. Under section 345 of the Income-tax Act, 2025, what conditions must be met?

Question and options

A registered non-profit organisation that provides medical relief proposes to run a pharmacy as a commercial activity. Under section 345 of the Income-tax Act, 2025, what conditions must be met?

  1. Separate books must be kept, and all its profits must be applied to the objectives

  2. It must be incidental to the objectives, and separate books must be kept

  3. It must be incidental to the objectives, and receipts must stay within 20% of total receipts

  4. It must be approved by the Commissioner, and separate books must be kept

Answer and explanation

Correct answer: B - It must be incidental to the objectives, and separate books must be kept

Section 345 of the Income-tax Act, 2025 lets a registered non-profit organisation, other than one advancing an object of general public utility, carry on commercial activity only if it is incidental to attaining its objectives and separate books of account are kept. The 20% ceiling on receipts belongs to section 346, which governs organisations advancing general public utility, not one providing medical relief.

Practice for these exams

Related exam syllabi

More solved explanations in Income tax - basic concepts, residence & heads of income