Clause 67 of the Finance Bill, 2026 seeks to amend section 349 of the Income-tax Act, 2025, which governs the furnishing of returns of income by registered non-profit organisations (NPOs) under Chapter XVII.
The amendment introduces a cross-reference to section 263(4) in section 349, thereby enabling registered NPOs to file belated returns of income. This restores a procedural facility that existed under the Income-tax Act, 1961 but was not expressly provided for under the 2025 Act.
The amendment takes effect from 1 April 2026, i.e., from tax year 2026-27 onwards.
Existing Legal Position Under Section 349
As section 349 currently stands:
- Registered NPOs are required to furnish their return of income
- The return must be filed within the time limit specified under section 263(1)(c)
- Section 349 does not refer to section 263(4), which deals with belated returns
As a result, there was no explicit statutory provision permitting registered NPOs to file a belated return under the Income-tax Act, 2025, unlike the position under the Income-tax Act, 1961.
What Does Clause 67 of Finance Bill 2026 Propose?
Clause 67 proposes to amend section 349 by including a reference to section 263(4).
Section 263(4) provides for furnishing of a belated return within the prescribed extended time limit.
By incorporating this reference, section 349 will now expressly allow registered NPOs to furnish belated returns, subject to the conditions and timelines applicable under section 263(4).
Meaning of the Proposed Amendment
In practical terms, the amendment means that:
- Registered non-profit organisations will be statutorily permitted to file a return of income after the original due date, if filed within the belated return window
- The return-filing framework applicable to other taxpayers is extended to NPOs
- The omission under the Income-tax Act, 2025 is corrected to ensure continuity with the earlier law
The amendment is procedural and enabling in nature.
What the Amendment Does and Does Not Do
What it does
- Enables belated return filing by registered NPOs
- Aligns section 349 with the broader return-filing scheme under section 263
What it does not do
- ❌ It does not extend the original due date
- ❌ It does not permit filing beyond the time allowed under section 263(4)
- ❌ It does not alter conditions for registration, exemption, or taxability of NPOs
Implications of the Amendment
1. Procedural Relief for Registered NPOs
Registered NPOs that fail to meet the original filing deadline will have a statutory opportunity to file a belated return, subject to section 263(4).
2. Reduction of Disproportionate Compliance Consequences
Late filing due to administrative or audit-related delays will no longer result in an absolute bar on filing, provided the belated return timeline is met.
3. Alignment with Earlier Law
The amendment restores the position that existed under the Income-tax Act, 1961, ensuring continuity and avoiding unintended hardship arising from legislative transition.
Effective Date
✔ Applicable from 1 April 2026. Applies to tax year 2026-27 and subsequent tax years
Conclusion
Clause 67 of the Finance Bill, 2026 introduces a narrow but important procedural correction to section 349 of the Income-tax Act, 2025. By enabling registered non-profit organisations to file belated returns of income, the amendment removes an unintended restriction, aligns the law with the earlier tax framework, and provides measured compliance relief, without affecting the substantive tax treatment of NPOs.
The change should be viewed as a restorative and alignment-oriented amendment, rather than a policy shift.
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