Form 108 Under the Income Tax Act, 2025: Exercising the Option Under Section 341(7) for Deemed Application of Charitable Income
Introduction: Why Form 108 Matters for Non-Profit Organisations
Registered non-profit organisations operating in India are required to apply at least 85% of their income toward charitable or religious purposes in any given tax year to remain eligible for tax exemption. However, practical realities — particularly timing mismatches between when income is earned and when it is actually received — can make this threshold difficult to achieve within the prescribed period.
To address such genuine hardships, the Income Tax Act, 2025 incorporates a specific relief mechanism under Section 341(7), which allows registered non-profits to treat the shortfall in income application as deemed application under Section 341(5). The procedural vehicle through which this option is exercised is Form 108, also referred to as FN 108 under the Income Tax Rules, 2026.
This article presents a comprehensive overview of FN 108 — its purpose, eligibility, filing procedure, deadlines, and consequences of non-compliance — drawn from the official FAQs and Guidance Note issued by the Income Tax Department, Ministry of Finance, Government of India.
Statutory Framework: Cross-Reference Between Old and New Law
Understanding FN 108 requires appreciating where it fits within the evolving legislative landscape. The form has evolved from its predecessor under the Income Tax Act, 1961, as summarised below:
| Parameter | Under IT Act, 1961 / IT Rules, 1962 | Under IT Act, 2025 / IT Rules, 2026 |
|---|---|---|
| Form Name | Form 9A | FN 108 (Form 108) |
| Relevant Section | Explanation to sub-section (1) of Section 11 |
Section 341(7) |
| Relevant Rule | Rule 17(1) |
RN 184(1) |
Important Note: The Income Tax Act, 2025 replaces references to "Assessment Year," "Financial Year," and "Previous Year" with the unified concept of "Tax Year." All forms, including FN 108, have been updated to reflect this terminology shift.
What Is FN 108?
FN 108 is an electronically filed statement through which a registered non-profit organisation formally exercises the option available under Section 341(7) of the Income Tax Act, 2025. The purpose of filing this form is to declare that the organisation was unable to apply 85% of its regular income during the relevant tax year — not due to mismanagement or misuse, but purely because the income had not been actually received within that period.
By exercising this option, the shortfall amount becomes eligible to be treated as deemed application of income in accordance with Section 341(5) of the Act. This mechanism effectively preserves the exemption status of the non-profit for that tax year, even where the 85% application threshold could not be met on account of a receipt-timing issue.
Think of it this way: if a trust earns Rs. 1.25 crore in a tax year but receives only Rs. 90 lakh by the end of the year, the balance Rs. 35 lakh — though not yet applied — can still be treated as deemed applied, provided FN 108 is filed correctly and in time.
Who Is Required to File Form 108?
The filing obligation under FN 108 applies to any registered non-profit organisation that:
- Has earned regular income during the tax year;
- Was unable to apply 85% of such income due to non-receipt of funds within the relevant tax year;
- Intends to claim the shortfall as deemed application of income under
Section 341(5)of the Income Tax Act, 2025.