In my last article I have discussed “Concept of NGO and Income Tax Provisions”. In that article we have discussed the formation of NGO, Procedure for Section 12A registration, Filing of income Tax Return for NGO and Section 80G registration etc.

We have already discussed, NGO’s have multiple options to select the form of constitution. There are various factors which may be considered while selecting a particular form for NGO. NGO can be in the form of Trust, Society or Section 8 Company.

Section 2(15) defines Charitable Purpose and sections 11, 12, 12A, 12AA and 13 of the Income –tax Act, are the main sections that deal with scheme of taxation exemption in respect of income of charitable or religious trusts/institution.

Section 11 and 12 of the income tax act provides exemptions to NGO’s. Registration u/s 12A is a pre-condition and mandatory requirement for claiming those exemptions. NGO’s having 12A registration enjoy tax benefits.

“It is important to note here that notwithstanding the fact that trust, society and section 8 companies are registered as per their respective acts, the registration under section 12A is necessary to claim exemption under Income Tax Act.”

The Supreme Court of India held in the case of:

U.P. Forest Corporation And Anr vs Dy. Commissioner Of Income Tax, … on 27 November, 2007

“A conjoint reading of Section 11, 12 and 12A makes it clear that registration under Section 12A is a condition precedent for availing benefit under Section 11 and 12 of the Act. Unless and until an institution is registered under Section 12A of the Act, it cannot claim the benefit of Section 11(1)(a) of the Act.”

Here we are discussing why NGO’s should get themselves registered u/s 12A of the Income Tax Act.

Benefits of Registration

The various benefits of Section 12A registration are enumerated as below:

1) The income applied for charitable or religious purpose will be considered as application of income i.e. expenditure incurred for charitable or religious purpose will be allowed while computing income of the trust.

2) The benefit of accumulating or setting aside of income not exceeding 15% for charitable or religious purpose will be available.

3) The accumulation of income, which is deemed as application of income as per section 11(2), shall not be included in the total income.

4) NGO’s receives various grants from government and other agencies. They are eligible to get grants and financial funding from various agencies. These agencies generally make grants to 12A registered NGO’s.

5) Benefit in Section 80G registration. NGO’s have to apply separately for Section 80G registration.

It is important to note that when registration is granted under section 12A, it does not mean that section 80G approval is to be given i.e. registration under section 12A will not provide automatic approval under section 80G. Section 80G applies only to charitable trusts or institution. It does not apply to religious trust or institutions.

6) Benefit in FCRA registration. NGO’s seeking foreign contributions have to obtain FCRA registration from the Ministry of Home Affairs.

7) Finance Act’2014 has extended the benefits of registration for prior years as well. These benefits have been extended to the trusts or institutions where the registration has been granted under section 12AA.

  • The benefit of Section 11 and 12 will apply to trust or institutions for all the pending assessments on the date of such registration subject to condition that the objects and activities of Trust in the earlier years claimed are same on the basis of which the registration has been granted.
  • Further, it is provided that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year.

The above benefits would not be available in case of any trust or institution which anytime had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled.

8) Registration under section 12A is one-time registration. Once the registration is granted to the trust, it will be hold good till the cancellation of registration. There is no provision which requires any renewal of registration. Thus, the benefits of registration can be claimed for lifetime by NGO.

(Submitted by – Tarun Kumar (B.Com, ACA) Mobile: +91-888-282-8112- Email-ID: [email protected])

Author Bio

Qualification: CA in Practice
Company: Tarun Harish Kumar & Co.
Location: Delhi, Delhi, India
Member Since: 25 Apr 2017 | Total Posts: 43
Tarun Kumar is a Fellow Chartered Accountant. His core practice area is advisory, litigation and compliances in Income-tax matters. He has been an advisor to various start-ups & NGOs in their set-up and tax function. He co-authored a book titled ‘Trusts and NGOs Ready Reckoner - A Practice View Full Profile

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  1. Anup Pandya says:

    Sir if theTrust is registered under Indian Trust Act but not registered u/s 12A/12AAA/80G under Income Tax, what would be the Income Tax implications. Wheter the Trust would be able to claim minimum exempt limit provided under the Income Tax Act chargeable to tax/ say for example, the Interest Income of the Trust is say Rs. 2,35,000/-, what would be the amount of Income Tax the truust is required to pay?

  2. Arvind Khedekar says:

    I have made donation to charitable trust which is in income tax exemption list it is showing 12a register not 80G
    Under which section as a donar I have to show amount in ITR-1 return
    Please guide

  3. Chandra Prakash Mishra says:

    Dear Sir
    I would like to know about 12 A registration that any NGO taking the benefits of 12A on a false 12A certificate. NGO is availing this benefit from last 10 years. So. What should be punishment for this .

    C. P. Mishra

  4. Vinayak says:

    Any institutation registered under Charity Act and Society registration Act 1860 are taking donations from their members only for day today expenses, Whether the donation received from the members only are taxable under the Income Tax Act ?
    and whether that institution has to apply for 80G or 12 of ITAct. Anybody will explain the detatails.This will help many institutions.

  5. Vinayak says:

    We have a pensioner’s association registered under the charity act and society registration act.
    The members of the association are giving donations to the association , whether the donation given by the members are taxable or exempted from income tax.

  6. Praveen says:

    1. what is the difference between an NGO registering under 12A or 12 AA.
    2. Kya ngo donation received karkai kisi dusri ngo ko re-donation kar sakti hai…

  7. Sanjay Sadhukhan says:

    A charitable organisation registered U/S 12A needs to submit a bid for doing a survey related to census. The same service is requested by the state municipal corporation. In the bid they have requested for GST registration number for the organisation. Since the organisation is a non profit organisation, is it necessary for them to register themselve and get GST registration or they can submit the bid without the registration number?
    if they register do their constituiton change from non profit to profit organisation?


    In 1968, CIT has mentioned that as the trust is purely an Educational trust, registration u/s 12A is not called for. He has also given 80G approval. The assessing officer says no registration given. Is it valid? Any case law favourable to assessee?

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