Section 445
Section 445: penalty for benefits to related persons
Section 445 targets a registered non-profit organisation that channels its income, directly or indirectly, to the benefit of a "related person" - a violation that also makes that income chargeable to tax under section 337. The penalty escalates sharply if the same organisation repeats the violation in a later tax year.
What Section 445 says
"If during any proceedings under this Act, it is found that a person being a registered non-profit organisation has any specified income which is chargeable to tax as per section 337 (Table: Sl. No. 2), the Assessing Officer may impose on such person, a penalty of-- (a) a sum equal to the aggregate amount of income applied, directly or indirectly, by such person, for the benefit of any related person referred to in section 355(h), if the violation is noticed for the first time during any tax year; and (b) a sum equal to 200% of the aggregate amount of income of such person applied, directly or indirectly, by that person for the benefit of any person referred to in section 355(h), if the violation is noticed again in any subsequent tax year."
How the penalty escalates
| When the violation is noticed | Penalty |
|---|---|
| First time, in any tax year | A sum equal to the aggregate amount of income applied, directly or indirectly, for the benefit of a related person under section 355(h) |
| Again, in any subsequent tax year | 200% of the aggregate amount of income so applied for the benefit of the related person |
Frequently asked questions
Who does Section 445 apply to?
A registered non-profit organisation that has specified income chargeable to tax under section 337 (Table Sl. No. 2) because it applied income, directly or indirectly, for the benefit of a related person referred to in section 355(h).
What is the penalty the first time this happens?
A sum equal to the aggregate amount of income applied for the related person's benefit, under section 445(a).
What if the same organisation does it again in a later year?
The penalty jumps to 200% of the aggregate amount of income applied for the related person's benefit, under section 445(b).
Related sections
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Get help responding to a non-profit compliance noticeLast updated 9 September 2026