Charitable Institutions- Registration U/s. 12AB of Income Tax Act

Budget 2020 proposes to digitize the process of registration for Charitable Trusts. Even the existing charitable institutions are required to apply for fresh registration under the new provisions of Sec 12AB of Income Tax Act. This article discusses the new provisions and procedure for registration under the new Section 12AB of the Act.

In order to address some issues, the Budget 2020 proposed following amendments effective from 1^st June, 2020:

1) Exclusion of exemption u/s 10(46) of the Act if approved u/s 12A

A) An amendment is proposed in Section 11(7) of the Act, to provide that exemption u/s 10(46) of the Act shall not be available to trust or institution registered u/s 12A read with Section 12AA (Section 12AB w.e.f. 1 June 2020) of the Act.

B) Further, where such charitable trust / institution applies for registration u/s 10(23C) or Section 10(46) of the Act, the registration of such institutions u/s 12A read with Section 12AA of the Act would become inoperative from the date on which the entity is registered u/s 10(23C) or Section 10(46) of the Act.

C) However, an opportunity has been given to such institution for obtaining registration under newly inserted section 12AB of the Act whereby such institutions would have to permanently forgo the exemption u/s 10(23C) or Section 10(46) of the Act.

All the existing Charitable Trust or Institutions registered under the following sections

• Section 12A
• Section 12AA
• Section 10(23C)
• Section 80G

need to be registered under the new section 12AB to claim exemption u/s 10 or 11, as the case maybe.

As a result of which, Section 12AA will cease to exist and a new section 12AB will come into effect from

The date of grant of registration u/s 12AB; or

The last date by which the application foe registration and approval is required to be made

Whichever is earlier.

The above section shall come into effect from 1^st June 2020 and the trusts or institutions are required to apply for registration and approval under Section 12AB within 3 months from 1^st June 2020, i.e., by 31^st August 2020.

Similarly, charitable trusts and exempt institutions which are availing exemption benefit under section 80G will also now be required to apply for fresh registration under section 12AB by 31^st August 2020.

Further, as a result of a tweet made by CBDT on 8^th May 2020, the new compliances mentioned under the above sections which were applicable with effect from 1^st June 2020 are now deferred and will be applicable from 1^st October 2020 and have to complied latest by 31^st December, 2020.

(Which further extended to 31^st March 2022)

2) Procedure of Registration of Trust ( Section 12A, 12AA, and 12AB of the Act)

In order to make the process of registration fair and speedy, to digitize and to keep a regular check on activities of the Trust Section 12A has been amended and Section 12AB has been introduced to provide the timelines for filing of an application for registration, which are mentioned below:

Sl No	Circumstances	Timeline for filing of application
1	Truste already registered u/s 12A or Section 12AA of the Act	By 31st August 2020 (Now 31st March 2022)
2	Trust obtained registration u/s 12AB	At least 6 months prior to date of expiry.
3	Trusts provisionally registered u/s 12AB of the Act	Earlier of the Following 6 months prior to the date of expiry; or Within 6 months of commencement of activities.
4	Where registration of Trust has become inoperative due to Section 11(7) of the Act	6 months prior to commencement of the AY from which said registration is sought to be made operative.
5	Where Trusts has adopted or modified the objects	Within 30 days from the date of such adoption / modification.
6	Any other case (including new registration)	Atleast 1 month prior to the commencement of FY, thereby a provisional registration shall be granted for a period of three years.

3) Period of registration

The registration once granted shall be valid for 5 Years . (Earlier it was for lifetime)

4) Timeline for grant of registration by Principal Commissioner or Commissioner

Earlier the time limit for grant of registration was 6 months. However, in the proposed provisions, an order of registration shall be passed as per the time frame given in the below table:

Sl No	Circumstances	Timeline for granting of approval
1	Application for registration under new provisions of a Trust already registered under old provisions	Within 3 months
2	Application for Registration after expiry of registration u/s 12AB Provisional registration; Modification of object; In accordance with Section 11(7)	Within 6 months.
3	Any other case	Within 1 month

5) Due date for filing of Return of Income:

Due date for filing of return for Trusts liable for audit u/s 12A(1)(b) extended to 31^st October. (Earlier it was 30^th September)

Registration Procedure

• The application can be made by filing Form 10A online on the incometax site.
• The form is available on income tax website under Income Tax Forms.

Contents required to be furnished in Form 10A

(1) Name of the Trust, Society or Institution.

(2) PAN details of the Trust, Society or Institution.

(3) Registered Address of the Trust, Society or Institution.

(4) Select the type of Trust:- Religious/ Charitable/ Religious-cum-Charitable

(5) E-Mail and Mobile number of the Managing Trustee/Chairman/Managing Director/Any authorized person by whatever name called

(6) Legal Status of the Trust

(7) Objects of the Trust

(8) Date of Modification of Objects, if any.

(9) Whether the application granted in the past is rejected or the registration is cancelled? If yes, details of the order cancelling the same.

(10) If the applicant is registered under FCRA, 2010? If yes, then details of the same.

List of documents to be submitted with FORM 10A.

1) Proof of Instrument creating the trust or establishing the Institution – Self certified Copies.

2) Proof of creation of Trust or establishment of the institution otherwise than under an instrument – Self Certified Copy

3) Proof of evidencing adoption or modification of the objects, if any – Self Certified Copy.

4)Copies of annual reports of the trust/institution for three immediately preceding financial years- All certified Documents.

5) Copies of existing order granting registration under section 12A or section 12AB, if any – Self Certified.

6) Copies of the order of rejection of an application, if any- Self Certified

In simple words, we can say the following is required for registration

Following documents are required from the client and annexed to FORM 10A while registration:-

• Registration Certificate and MOA / Trust Deed (two copies- self attested by the Managing Trustee)
• NOC from the Landlord where registered office is situated (if place is rented)
• Copy of PAN card of Trust.
• Electricity Bill/ House Tax/ Water Bill.
• Evidence of welfare activities carried out and progress report of the same since 3 years or since inception.
• Books of Accounts, Balance Sheet, ITR (if any) since inception or last 3 years.
• List of Donors with their PAN and address.
• List of Governing body or members of the trust/ Institution in the following format

Sr. No.

Name

Address

Adhaar No.

PAN

Mobile No.

Email id

• Trust Deed for verification of Original Registration Certificate and MOA.
• Any other information / document as may be asked by the Income Tax Department.

Conclusion:-

• From 1^st October 2020, the new provisions will come into effect, as a result of which every trust or Institution which are already in existence will have to mandatorily renew the certificate granted under section 12A, 12AA, 80G within the time limit prescribed which is latest by 31^st December 2020. (The date extended to 31^st March 2022)
• In case of new Trusts or Institutions they will have to apply for registration under section 12AB within the time limit prescribed.

(Republished with Amendments)