Registration of NGOs under Section 12AB of the Income Tax

Introduction:

NGOs in India can function in the form of constitutions like, trust, society or a Not for Profit company etc.,. For the purpose of claiming exemption under section 11 & 12 of the Income Tax Act, 1961 (the Act) it is mandatory for all the NGOs to register themselves under section 12 A of the Act.

Prior to the Amendment of the Finance Act 2020, the registration under section 12A was a one time registration and it was valid until it is cancelled.

With effect from April 1, 2021 –for the purpose of claiming exemption under section 11 & 12 of the act, the NGOs are not only required to register themselves under Section 12 AB of the Act, but are also required to renew such registration once in every 5 years thereafter.

Migration of existing registrations:

All registered organizations are required to apply for re-validation in the form no 10A, within 3 months from 1st April 2021. Registration so re-validated shall be valid for 5 years.

The application for renewal of registration after 5 years needs to be submitted at least 6 months prior to the expiry of the validity period. The renewal application to be submitted in Form No 10AB

Impact on failing to register under section 12AB:

In the event of failure to re-validate within 3 months from 1st April 2021, the organizations shall not be allowed to take exemptions under section 11 and 12 of the Act and they have to pay tax on income/surplus.

Section 11 – Income from property held for charitable or religious purposes
Section 12 – Income of trusts or institutions from contributions

Provisional registration:

• The Finance Act 2020, has brought in the concept of provisional registration to ease out any differences or litigations between the income tax department and NGOs seeking registration, before the commencement of activities.

In this regard the organizations shall make an application to the respective jurisdictional Principal Commissioner or Commissioner of Income Tax. On receipt of the application and on being satisfied, a provisional registration of 3 years shall be given to the organizations.

The renewal of such new registration, need to be submitted

– At least 6 months prior to the expiry of validity period or

– Within 6 months from commencement of activities, whichever is earlier.

The provisional registration so renewed shall be valid for a period of 5 years and it has to be renewed at the end of each 5 year period.

Timeline for new registration:

In cases of new registration, application shall be submitted, at least one month prior to the commencement of the previous year relevant to the assessment year for which registration is sought, meaning thereby new NGO will not be entitled to have the benefit of registration of section 12AB in the first year of operation.

Simultaneous benefits for NGOs u/s 12A and 10 (23C) (As amended by Finance Act, 2020)

The organisations are required to reapply under section 12AB of the act, if the organisation’s registration is being non-operative due to simultaneous exemptions in various other sections [10(23C)] of the act.

Application in such scenario is to be submitted atleast 6 months prior to the expiry of registration and registration under section 12AB shall be valid for 5 years and has to be renewed in every 5 year.

Change or Modification of objects clause of NGOs (As amended by Finance Act 2020)

In the event of any change or modification of objectives of the organization, then it has to re-apply for registration with modified or changed objectives under section 12AB. The registration will be given for 5 years and needs to be renewed in every five years.

The application for registration shall be submitted within 30 days from such change in objectives.