Section 12AB Renewal for Small Charitable Trusts: 5-Year vs. 10-Year Validity

Section 12AB Renewal of Charitable trusts and Institutions – Whether Small trusts having Gross receipts upto Rs. 5 Crores required to file Form 10AB for renewal of registration u/s. 12AB as period of validity of registration increased from 5 Years to 10 Years?

Charitable trusts and institutions, registered under section 12AB and 80G of the Income Tax Act, 1961 (‘the Act’) are having registration Certificates in Form No. 10AC or Form No. 10AD, which are valid for period from AY 2022-23 to AY 2026-27 (5 Years) in majority of the cases.

The provisions relating to registration of charitable and religious trusts and institutions had undergone paradigm shift vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applicable w.e.f. 01.04.2021, whereby, all the trusts and institutions who were earlier registered under Section 12AA and Section 80G from past many years (i.e. having Registration Certificates upto 31.03.2021) had to apply for renewal of their Registrations, which are now valid for a period of 5 years, i.e. generally from AY 2022-23 to AY 2026-27 in  majority of the cases.

In new / fresh registrations cases, applications were filed in Form No. 10A, which were granted provisional registration Certificate in Form No. 10AC for a period of 3 years and application was again filed for renewal of the said provisional registration (i.e. for conversion of provisional registration into final registration), which, upon approval, were granted Registration Certificate in Form No. 10AD by the Jurisdictional CIT(Exemption) having validity of 5 Years as per item (A) of sub-clause (ii) of Clause (b) of sub-section (1) of Section 12AB of the Act [i.e. Section 12AB(1)(b)(ii)(A)]

As per the provisions of sub-clause (ii) of clause (ac) of sub-section (1) of Section 12A of the Act [i.e. Section 12A(1)(ac)(ii)], application for renewal of registration is required to be filed atleast 6 months prior to expiry of the registration period. In majority of the trusts and institutions, the registrations are valid upto AY 2026-27, which means upto FY 2025-26, i.e. upto 31.03.2026, and as per Section 12A(1)(ac)(ii), application is required to be filed 6 months prior to 31.03.2026, i.e. application in Form No. 10AB for renewal is required to be filed on or before 30.09.2025.

However, in order to reduce the compliance burden on small trusts or institutions, a Proviso was inserted in sub-section (1) of Section 12AB of the Act, vide Finance Act, 2025, w.e.f. 01.04.2025, as per which, the period of validity of registration was increased from 5 years to 10 years, in cases, where application had been made under sub-clause (i) to (v) of clause (ac) of sub-section (1) of Section 12A [i.e. Section 12A(1)(ac)(i) to (v)], and the total income of the trust, without giving effect of Section 11 or 12 of the Act, does not exceeds Rs. 5 Crores during each of the 2 previous years, preceding to the previous year in which such application is made (‘small trusts or institutions’).

The said Proviso inserted vide Finance Act, 2025 applicable w.e.f. 01.04.2025 is as under:

“Provided that where an application is made under sub-clauses (i) to (v) of the said clause, and the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed rupees five crores during each of the two previous years, preceding the previous year in which such application is made, the provisions of this sub-section shall have effect as if for the words “five years”, the words “ten years” had been substituted.”

The wordings of the above Proviso, indicate that if the application for renewal was filed under sub-clauses (i) to (v), for small trusts or institutions, then in such cases, in sub-section (1) of Section 12AB, for the words 5 years, the words 10 years had been substituted, i.e. the Registration Certificate granted for 5 years, should be treated as Registration Certificate granted for 10 Years, in accordance with the Proviso to Sub-section (1) of Section 12AB. The words used in the Phrase is “had been substituted”, which indicates past tense and which means that it should also apply on the existing registration certificates granted prior to 01.04.2025, and not only on the Registration Certificates granted in respect of applications filed after 01.04.2025.

The Memorandum explaining the provisions in the Finance Bill, 2025 will be relevant and guiding in this regard. The relevant extract of the same is as under:

“III. Period of registration of smaller trusts or institutions

Section 12AB provides registration of trust or institution for a period of 5 years or provisional registration (where activities have not commenced at the time of filing application for registration) for a period of 3 years. At the expiry of such registration or provisional registration, or in case of provisional registration, if the activities of the trust or institution have commenced, the trust or institution is required to make application for further registration.

2. It has been noted that applying for registration after every 5 years, increases the compliance burden for trusts or institutions, especially for the smaller trusts or institutions.

3. To reduce the compliance burden for the smaller trusts or institutions, it is proposed to increase the period of validity of registration of trust or institution from 5 years to 10 years, in cases where the trust or institution made an application under sub-clause (i) to (v) of the clause (ac) of sub-section (1) of section 12A, and the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed Rs. 5 crores during each of the two previous year, preceding to the previous year in which such application is made.

4. These amendments will take effect from the 1st day of April, 2025.”

On perusal of the above extract of the Memorandum explaining the provisions in the Finance Bill, 2025, is can be understood that the language used is “… it is proposed to increase the period of validity of registration of trust or institution from 5 years to 10 years…”, which means that the validity of registration is sought to be increased and “in cases where the trust or institution made an application”, the words ‘made’ instead of ‘makes’, indicate past tense and thus, it can be inferred that the Proviso shall also apply to applications ‘made’ earlier also.

The Speech of the Honourable Union Finance Minister Smt. Nirmala Sitharaman is also relevant and guiding in this regard. The relevant extract of the Budget Speech is as under:

“Reducing Compliance Burden

142. I propose to reduce the compliance burden for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years. It is also proposed that disproportionate consequences do not arise for minor defaults, such as incomplete applications filed by charitable entities.”

The above wordings of the Budget Speech of the Honourable Union Finance Minister also indicate that the period of registration has been increased from 5 years to 10 years.

Further, if it had been the intention of legislature to provide such extension only for registration certificates granted in respect of applications filed u/s. 12A(1)(ac)(ii), it would have excluded other sub-clauses, whereas, the Act clearly includes sub-clauses (i) to (v), indicating a broader legislative intent. Inclusion of sub-clause (i), which is for renewal of existing trusts which were registered under section 12AA prior to amendment vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, further strengthens this view.

Thus, in view of the above amendment made vide Finance Act, 2025, from the Memorandum explaining the provisions of the Finance Bill, 2025 and the Budget Speech, it can be inferred that the existing registration certificates shall be valid for a period of upto 10 years.

However, no such clarity has been provided by the Income Tax Department / CBDT. Further, in absence of such clarification, since all the existing registration certificates have generally AY 2026-27 mentioned and whether new registration certificates would be issued to such trusts or institutions or not?

In absence of any such clarification, it is better advisable to file Form No. 10AB on or before 30.09.2025 taking a conservative view.

Further, as regards trusts or institutions, having total income of more than Rs. 5 Crores, before giving effect to the provisions of Section 11 or 12, then such trusts or institutions have not been provided with any relaxation and such trusts or institutions will have to file application for renewal of registration u/s. 12AB atleast 6 months prior to the expiry of the registration, i.e. on or before 30.09.2025 where the registration is valid upto AY 2026-27.

It is pertinent to note that period of validity of registration has been increased only under section 12AB and not under section 80G and the said Registration Certificates are valid only for 5 Years. Thus, where a trust is registered under 80G as well, application for renewal of registration is required to be filed on or before 30.09.2025.

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