Income tax Act 1961 provides exemption to the Public Charitable trust and Religious trust (herein after referred to as Trust in this article)u/s 11(exemption from Income from property held for charitable or religious purposes) and u/s 12 ( exemption Income of trusts or institutions from contributions). However to claim exemption under the aforementioned section, the trust has to Certify certain conditions laid down in section 12A of the income tax Act. Finance Act 2020 has amended section 12A inserting a new clause (ac) to subsection 1, inserted a new section 12AB and also repealed an old section 12AA with effect from 1st of June 2020.
Before moving to registration it is inevitable to have a look on statutory provision. Section 12(1) (ac) of income tax act reads as follows:
(ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,—
(i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA, [as it stood immediately before its amendment by the Finance Act, 2020] within three months from the date on which this clause has come into force;
(ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, at least six months prior to expiry of the said period;
(iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier;
(iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative;
(v) where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification;
(vi) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought,
and such trust or institution is registered under section 12AB;]
Analysis of Statutory provision:
So after reading the above provision, it is evident that every trust who wants to avail the exemption under section 11 and section 12 shall have to apply for registration to Principal Commissioner or Commissioner under section 12A and get itself registered under section 12AB (Section 12AB newly inserted by the Finance Act 2020 with effect from 1st of June 2020) . Now the subject matter is when to apply for registration, for this let us bifurcate the trust in to 3 categories.
1) New trust seeking to take registration for the 1st time:
Application shall be made to principal Commissioner or Commissioner at least one month prior to the commencement of previous year relevant to assessment year from which registration is sought.
Example: Lets us say a public Charitable trust ‘Bijay Foundation’’ wants to get itself registered from the assessment year 2022-23, then it has to apply for registration by 1st march 2021.
2) Old trust Previously Registered under Section 12AA(already registered as per old provision).
A trust which is previously registered as per old provision shall have to apply for fresh registration within 3 months from 1st of June 2020 i.e within 31st August 2020.
3) Trust taken fresh registration under Section 12AB.
The trust which has applied for registration under new provision (section 12(1) (ac) ), shall be granted registration under section 12AB for a period of 5 years. So if the trust want to continue to avail the exemption under section 11 and 12 ,shall apply for fresh registration atleast 6 months prior to expiry of the registration granted under section 12 AB.
Note: So as per the amendment made by Finance act 2020, Every trust shall be granted registration for a period of maximum 5 years at a time and they have to apply for fresh registration in every 5 years.