Finance Bill, 2025, proposes amendments to Section 12AB of the Income-tax Act, extending the validity period of registration for smaller trusts and institutions from 5 years to 10 years. This change applies to trusts or institutions with total income not exceeding ₹5 crore in each of the two preceding financial years, without considering exemptions under Sections 11 and 12, provided they apply under specific clauses of Section 12A. This amendment aims to reduce compliance burdens for smaller organizations that currently need to renew their registration every 5 years. Additionally, the amendment addresses procedural changes in handling violations, ensuring incomplete applications under Section 12A are no longer treated as specified violations. This adjustment is intended to streamline the registration process and provide relief to smaller trusts. These amendments will take effect on April 1, 2025.
Budget 2025: 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.
[Clause 7]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 7 of the Bill seeks to amend section 12AB of the Income-tax Act relating to procedure for fresh registration.
Sub-section (1) of the said section, inter alia, provides for the procedure for registration or cancellation of registration of trust or institution by the Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A.
It is proposed to insert a proviso to the said sub-section to provide that where an application is made under sub-clause (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 year, preceding to 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.
Sub-section (4) of the said section, inter alia, provides that where registration or provisional registration of a trust or an institution has been granted and subsequently, the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year, the Principal Commissioner or Commissioner shall, inter alia,—
(i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation;
(ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place;
Explanation to sub-section (4) of the said section provides that “specified violation”, inter alia, means the application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.
It is further proposed to amend the Explanation to the said sub-section so as to omit the words “is not complete or it” so that the incomplete application referred to in clause (ac) of sub-section (1) of section 12A, is not treated as a specified violation.
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
Amendment of section 12AB.
In section 12AB of the Income-tax Act,
(a) in sub-section (1), the following proviso shall be inserted, namely:––
‘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.’;
(b) in sub-section (4), in the Explanation, in clause (g), the words “is not complete or it” shall be omitted.
