Are you someone who runs a trust or plans to start one? Do you know that the law gives you special rebates under section 12A and 80G? Are you grasping this opportunity, or you wish to, but……..don’t know how?
The government introduced specific provisions in the Finance Act, 2020, making it mandatory for charitable/religious/educational institutions/trusts to re-register /re-approval/provisional registration under the sections mentioned earlier. It has been made effective from 1st April 2021 by CBDT vide its notification number 19/2021 dated 26th March 2021.
If you’re a proud founder of an NGO, a manager of its funds or a big-hearted donor, here we have come up with all the answers you need for saving your monies and availing the benefits offered to you.
Section 12A of the Income Tax Act, 1961 is the stepping stone for every charitable organisation. It enables non-profit entities such as Charitable Trusts, Non-Profit Organisation, Welfare Societies, Religious Institutions, etc. to claim full tax exemption as per Section 11 and 12 of the Income Tax Act, 1961. It also helps seek grants from governments or organisations abroad, thus holding immense importance in the charity world.
Another significant benefit available for charitable institutions is in section 80G, which allows their donors to deduct the amount of donations made by them from their gross total income. This section increases the volume of assistance, and together, these sections provide significant relief to both trusts and their donors.
Section 12A provides tax exemptions to charitable institutions whereas section 80G provides deductions in respect of donations provided to such institutions to the donors of such funds.
1. A new section, section 12AB replaces the existing section 12AA.
2. The process of registration and approval of NGO would be made completely electronic.
3. Under this new scheme, the registration would be granted for a period of five years. As a result, registration will have to be renewed every 5 years.
4. Provisional registration would be granted for 3 years to the charitable institutions which are yet to start their activities.
5. NGO’s registered before 1st April, 2021 would be required to make an application again under new scheme of registration.
The person who wants to avail of benefit as per section 11 & 12 has to apply in the prescribed standard form, i.e. 10A or 10AB, to the Principal Commissioner to register the trust or institution.
Form 10A would be used for –
1. Already registered/approved cases
Application for revalidation of registration/approval for existing trust registered/approved under Section 12A/12AA/10(23C)/80G.
2. New Cases
Application for provisional registration/approval under section 12AB/10(23C)/80G.
1. Conversion of provisional registration into regular registration.
2. Renewal of registration/approval after five years.
3. Activating inoperative registration due to approval under section 10(23C)/10(46).
4. Re-registration for modification of objects for entities registered under Section 12AB.
The new registration process can be broadly divided into 3 parts –
All the institutions registered under section 12A or 12AA or having approval under section 10(23C), 35AC or 80G of the Income Tax Act, 1961, have to mandatorily apply for re-registration or re-approval in the amended Form 10A to continue availing benefits of the various section of the law.
The registration has to be taken within three months from the first day of April 2021, i.e. up to 30th June 2021.
One has to file Form 10A for obtaining registration. One can file this form using the e-filing portal of income tax India.
Once the institution gets itself re-registered, The Income Tax Department will produce an electronically generated ‘Unique Registration Number’ (URN) for your charitable trust/ religious institutions and provide a certificate evidencing its registration.
The registration would be applicable for five years.
To continue availing the benefit of section 80G, the institutions need to make an application in form 10A separately. Hence, the institutions have to file the same application twice for registering under different sections.
1. Provisional Registration
Trusts or institutions seeking registration/approval afresh under any of the sections mentioned above, including section 80G, are also required to apply through Form 10A. Such institutions will be granted provisional registration/approval for the tenure of three years.
The application shall be filed one month before the commencement of the previous year in which the charitable activity has to be started.
The provisional registration/approval shall be applicable for a tenure of three years.
Order granting provisional registration shall be passed within 1 month from the end of the month in which such application is filed.
III. Renewal of Registration
NGOs registered u/s 12AB or approved u/s 10(23C) or Section 80G shall file a fresh application for renewal of registration within 6 months prior to the expiry of 5 years from registration of the NGO.
The Commissioner shall make enquiries for to satisfy himself about the genuineness of activities and compliance of other laws. If he is satisfied, the approval shall be granted for 5 years.
Otherwise, he shall pass an order rejecting the application for renewal of registration and also cancelling its existing registration.
Order granting such registration shall be passed within 6 months from the end of the month in which such application is made.
The prescribed time limit and the applicable form is discussed below:-
|Trust availing exemption under section||Form Applicable||Due date|
|Registered under section 12A or 12AA before 1st April, 2021||Form 10A||30th June,2021|
|Having approval under section 10(23C), 35AC or 80G||Form 10A||30th June,2021|
|Trusts making application for provisional registration/approval||Form 10A||One month before the commencement of the previous year in which the charitable activity has to be started|
|Having provisional registration under section 12AB||Form 10AB||At least 6 months prior to expiry of period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier|
|Section 12AB (Renewal of registration/approval after five years)||Form 10AB||At least 6 months before the expiry of the registration period.|
|Registration has become inoperative due to the first proviso to sub-section (7) of section 11||Form 10AB||At least 6 months prior to the commencement of the assessment year from which the said registration is sought to be made operative|
|Re-registration for modification of objects for entities registered under Section 12AB||Form 10AB||Within a period of 30 days from the date of the said adoption or modification|