Charitable organizations are formed with the objective to serve the poorer section of the society and work towards the encouragement of education, medical relief, preservation of the environment, and preservation of monuments or places or objects of artistic or historic interest, and also towards the advancement of various other objects.
In India, the government has provided various types of exemptions to these Charitable Institutions under Section 80G and Section 12AB of the Income Tax Act, 1961.
As per the present situation, CBDT decided to again extend the due date for applying for registration under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act in Form No. 10A/ Form No.10AB, for registration/ provisional registration/ intimation/ approval/ provisional approval of Trusts/ Institutions/ Research Associations etc. has been extended till 31st August, 2021 .
Hence now all existing trust need to re-register themselves after 31.08.2021. the choice is claimed to be taken due to this crisis that are prevailing within the country thanks to COVID 19 Pandemic.
They have also introduced certain new compliances under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the income tax, and the same is expected to be completed latest by 31st August, 2020, being extended till 31st December 2020.
Apart from this, the other schemes have also been extended to 01.04.2021 and 30th June 2021 respectively.
Now looking in to the present situation the CBDT has already extended the due date for compliance under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act in Form No. 10A/ Form No.10AB, in respect of registration either provisional or final registration.
The said compliances are now to be complied with till 31st August, 2021 and thus, all the existing trust would be required to apply for re-registration after 31.08.2021.
NEW COMPLIANCES IN RESPECT OF SECTION 12A AND 80G
As per the new Compliance, being introduced in respect of section 12A and section 12AA, all the NGOs already availing exemption u/s 12AA of the IT Act will have to reapply for the same exemption, latest by Dec 31, 2020. and will be required to obtain fresh registration u/s 12AB.
NEW REGISTRATION PROCESS OF SECTION 12AB
Finance Act, 2020 had inserted a replacement clause (ac) in section 12A (1) of the taxation Act, 1961 which couldn’t be made effective in yr 2020-21 because of Covid-19 situations. The said clause has been made mandatory with effect from 01-04-2021.
Under the section 12A (1) (ac) of the Income Tax Act, 1961, it was provided that notwithstanding anything contained in clause (a) to (ab), the person being in receipt of the income who intends to avail the advantage under section 11 & 12, shall file an application in prescribed form to PCIT or CIT for registration of the trust.
In order to get such registration, the applicant is required to file the application in Form No. 10A & 10AB.
In short, wherever, a trust intends to avail the benefit u/s 11 & 12, they would be required to make an application in Form No. 10A or 10AB, to PCIT or CIT for registration of trust.
The procedure for registration was earlier laid out in section 12AA. However, section 12AA has been withdrawn now and section 12AB has now been inserted for creating effective the registration procedure of trusts.
Thus, all trusts which were earlier registered u/s 12A or 12AA shall now need to obtain fresh registration u/s 12AB.
What is Section 12AB?
Earlier, NGOs tends to take up Registration under Section 12 AA, in order to avail exemption of income earned. It was provided that all the income of an NGO shall not be taxable, after registering under Section 12A.
Where an NGO fails to take up section 12A Registration, taxation is payable on surplus during the year.
However, under the new Compliance, being introduced in respect of section 12A and section 12AA, all the NGOs being presently registered and availing exemption u/s 12AA of the IT Act, would be required to reapply for registration, latest by Dec 31, 2020.
CONDITIONS FOR REGISTRATION SECTION 12AB
All the prevailing registered trusts under the section 12A or section 12AA would move to new provision section 12AB.
Newly established trusts and institutions applying to tax for registration for the very first time are given provisional registration for 3 years.
The provisional registration is valid for 3 years.
Prior to six months from the completion of three years provisional registration, an application for renewal of provisional registration or rather registration should be made.
All the registrations under Section 12A or 12AA once done, are required to renew their registration at the interval of each 5 years.
After processing your application, your trust or institution’s registration under section 12AA and 80G is also re-validated by taxation for a period of 5 years.
BENEFITS FOR TAKING SECTION 12AB REGISTRATION
Income of such entity becomes exempted from tax liability.
There are benefits in the form of grants, being received from government / abroad / other agencies.
Benefits in FCRA registration
DOCUMENTS REQUIRED FOR SECTION 12AB REGISTRATION
Registration document being issued in the name of the said entity.
Copy of PAN card, being issued in the name of the directors/trustees of the entity.
Copy of Aadhaar Card, being issued in the name of the directors / trustees of the said entity.
Digital signature of any 1 of the directors / trustees, who is regarded as the authorized signatory of the said entity.
By Laws, being framed for governing the entity’s activities.
Audit reports, made by a CA/CMA, for all the periods since the inception of the entity.
Audited Financial statements of the said entity, since their inception.
What is Section 80G?
Section 80G Registration under Section 80G of taxation Act provides benefits to the donor of an NGO. Once the trust takes registration under this section, their donors will be able to avail some amount of deduction from their taxable income.
CONDITIONS FOR REGISTRATION U/s 80G
NGO shouldn’t have any income which aren’t exempted, like business income. However, where the NGO is also having some business income, then the same would be required to maintain separate books of accounts and shall not be allowed to divert donations received for the such business.
Bylaws or objectives of the NGOs shouldn’t contain any provision for spending the income or assets of the NGO for purposes apart from charitable purposes.
It shall not work for the good thing about particular religious community or caste.
Shall maintain regular accounts of its receipts & expenditures.
Donor-wise details to be maintained and every one donor will need to incline a certificate.
Tax deductions under section 80G won’t be available to donors who choose reduced rate of tax.
BENEFITS FOR TAKING SECTION 80G (5) REGISTRATION
Registration under section 80G (5) of the income tax Act provides benefits to NGOs.
The NGO has taken 80G (5) certification, their donor would be able to avail some amount of deduction in their taxable income.
Where an NGO gets itself registered under section 80G (5) then the person or the organization making a donation to the NGO will get a deduction of 50 from his/its taxable income.
By availing 80G (5) Certificate, NGO can attract more donors.
DOCUMENTS REQUIRED FOR REGISTRATION U/s 80G
Registration certificate, being issued in the name of the entity.
Details of activities, being undertaken by the entity since their inception.
Digital signature of any 1 of the directors / trustees, who is regarded as the authorized signatory of the said entity.
By Laws, being framed for governing the entity’s activities.
Audit reports, made by a CA/CMA, for all the periods since the inception of the entity.
The Audited Financial statements of the said entity, since their inception.
Section 12AB Certificate
VALIDITY OF REGISTRATION CERTIFICATE U/s 80G
The Provisional registration are going to be valid for 3 years from the assessment year from which the registration is sought
Final registration is going to be valid for the amount of 5 years. (According to the primary proviso to sub-section (2) of section 12A the Act, where the appliance is created under 12A(a)(ac)(iii) the provisions of section 11 and 12 shall apply from the primary assessment year that it had been provisionally registered)
As a result of the above amendment, following effect shall happen with effect from 1st June 2020: –
All the prevailing charitable and spiritual institutions (including NGOs) which are registered or approved under the subsequent sections-
Section 12A
Section 12AA
Section 10(23C)
Section 80G
are compulsorily required to modify to section 12AB for fresh registration so as to continue availing exemption under section 10 or 11, because the case is also.
All the institutions, being registered as trusts under section 10(23C) or section 12AA, will now be required to apply for re-registration under section 12AB.
As a result of which, Section 12AA which prescribes the registration process for the registration Trusts or Institutions will cease to exist and a replacement section 12AB will get force with effect from-
the date of grant of registration under section 12AB or;
the last date by which the applying for registration and approval is required to be made;
whichever is earlier.
The above section shall acquire effect from 1st June 2020 and therefore the trusts or institutions are required to apply for re-registration and approval under section 12AB within 3 months, i.e., from 1st June 2020, till 31st August 2020.
Similarly, charitable trusts and exempt institutions which are availing exemption benefit under section 80G will now be required to use for fresh registration under section 12AB by 31st August 2020.
As a result of the above, the new compliances mentioned under the above sections which were applicable with effect from 1st June 2020 are now deferred and can be applicable from 1st October 2020 and need to complied latest by 31st December, 2020.
Also, a press note was released on 9th May 2020 deferring the implementation of latest procedure under section 12AB. The press notes in regard of the identical was released on May 9th 2020.
APPROPRIATE AUTHORITY OF FILING FORM 10A
The application shall be made online by Filing Form 10A together with the specified documents to the Commissioner or Principal Commissioner who shall pass an order granting approval or rejection within three months from date of commencement of latest provisions, i.e., by 31st August 2020.
Also, where the Commissioner or Principal Commissioner, is satisfied, that the charitable/religious trusts, in not complying with their objects, being mentioned in their byelaws, shall cancel their registration, after providing a reasonable opportunity of being heard.
Similarly, different time periods have been prescribed in respect of different categories of institutions. These are as follows –
CATEGORY
DUE DATE
INSTITUTIONS ALREADY REGISTERED UNDER SECTION 12A OR 12AA OR HAVING SECTION 80G CERTIFICATION.
31ST AUGUST, BEING EXTENDED TO 31ST DECEMBER 2020
INSTITUTIONS HAVING REGISTRATION UNDER SECTION 12AB
6 MONTHS BEFORE THE EXPIRY OF THE 5 YEARS FROM THE DATE OF GRANT OF REGISTRATION.
INSTITUTIONS HAVING PROVISIONAL REGISTRATIONS UNDER SECTION 12AB
EARLIER OF –
6 MONTHS BEFORE THE EXPIRY DATE OF PROVISIONAL REGISTRATION
6 MONTHS FROM THE DATE OF COMMENCEMENT OF BUSINESS ACTIVITIES.
INSTITUTIONS UNDERTAKE MODIFICATION OF THEIR OBJECTIVES
WITHIN 30 DAYS FROM THE DATE OF SUCH MODIFICATIONS.
IN ANY OTHER CASE
AT LEAST 1 MONTH BEFORE THE COMMENCEMENT OF THE RELEVANT PREVIOUS YEAR.
PROCEDURE FOR REGISTRATION
The applicant would be required to file an online application in the form 10A, being available on the income tax portal – incometaxindiaefiling.gov.in.
The form is on the market on the income tax website under income tax Forms Section under e-file menu which is visible after login on the web site.
Information/details, required to be furnished in Form 10A are as follows –
Name of the respective entity.
Details of the PAN card issued in the name of such entity.
Details in respect of the Registered Address of the said entity.
Select the sort of Trust: – Religious/ Charitable/ Religious-cum-Charitable
Contact details of the authorized person of the entity, including their E-Mail and Mobile number.
Status of the Trust
Objects of the Trust
Date on which the entity undertook any Modification of their Objects, if any.
Where an application was made in past and the same was rejected or their registration got cancelled, then the details of the order, being passed in such aspect.
Where the applicant is registered under FCRA, 2010, the details of the registration certificate granted to them.
DOCUMENTS REQUIRED
Following is that the list of documents as mentioned on the tax Website: –
Where the trust is formed, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
Where the trust is formed, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
Self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, because the case may be;
Self-certified copy of the documents, providing information in respect of any modification, being made to the objects, if any;
where the trust or institution has been living during any year or years before the financial year within which the applying for registration is created, self-certified copies of the annual accounts of the trust or institution regarding such prior year or years (not being quite three years immediately preceding the year within which the said application is made) that such accounts are made up; note on the activities of the trust or institution;
self-certified copy of existing order granting registration under section 12A or section 12AB, because the case may be; and
self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AB, because the case is also, if any.
In simple words, we are able to say the subsequent is required for registration
Following documents are required from the client and annexed to make 10A while registration: –
Registration Certificate, along with the MOA / Trust Deed of the entity (two copies, being self attested by the Managing Trustees)
NOC received from the landlord, in respect of the registered office being situated at a rented place.
Copy of PAN card, being issued in the name of the trust.
Electricity Bill/ House Tax/ Water Bill.
Evidence of welfare activities, being undertaken by the entity, along with a written report of the same, for a period of last 3 years or since their inception.
Books of Accounts, record, ITR (if any), for a period of last 3 years of since their inception.
Details in respect of the Donors, along with their PAN details and address proof.
List of administration or members of the trust/ Institution within the following format
SR. NO.
NAME
ADDRESS
ADHAAR NO.
PAN
MOBILE NO.
EMAIL ID
Trust deed of the Trust, being required for verification of the Original Registration Certificate and MOA of the entity.
Any other information / document, as the Income Tax Department, may deem fit to be called.
REGISTRATION UNDER SECTION 80G OF INCOME TAX ACT, 1961
Income tax department has provided many exemptions and tax related benefits to those NGOs and their donors. For getting tax related benefits these NGOs should enroll themselves with taxation department by way of applying under Section-11, 12A, 12AB, 80G etc.
Also, this enrolling process was very cumbersome and time consuming. Now, income tax department provided ease, since the process has become easier and duration for approval from CIT is additionally reduced.
Thus, the approval process is going to be much faster than the earlier one.
As per law, the Income of public trust is exempt per Section 11, 12, 12A, 12AA, 12AB, and 13. the first condition for getting income exempt under this section is that the NGO should be established in accordance with law and its object should fall within the definition of the term “Charitable Purpose” and definition of charitable purpose is given in Section 2(15) of tax Act.
During this article, we’ll get a glimpse of registration under Section 12AB of tax Act and a detailed discussion of registration under Section 80G of tax Act, 1961
CBDT has issued taxation (6th Amendment) Rules 2021 vide notification dated 26th March, 2021 during which they need enlisted the specified documents for getting registration under -80G of tax Act, 1961.
From 01.04.2021, all charitable institutions which are currently registered under section 12A/12AA are required to use for a fresh registration under section 12AB. Further, all new entities which want exemption under section 11 and 12, are required to use for registration under section 12AB.
All existing NGOs (which are registered under section 12A/12AA) are required to induce fresh registration U/s 12AB within 3 Months
All other NGOs, not being registered under Section 12A/12AA, shall apply for registration U/s 12AB, at least 1 month prior to the commencement of the relevant previous year in which they sought to take such registration.
Certain amendment has been made under Section 80G (5) of Income tax Act, 1961, by passing of Finance Act 2020, consistent with which, all entities which are currently registered under this section, would be required to re-apply for a fresh approval under the amended scheme of Section -80G and every new entity which want to use for fresh registration under this section are required to use for approval under the new scheme
As per Rule 11AA, all the institutions requiring donations, would necessarily be required to approval under section 80G(5)(vi).
In order to made an application under section 80G(5)(vi), the requisite institution or fund would be required to fill the respective Form –
In Form No. 10A, where the application is required to be made under the clause (i) or clause (iv) of first proviso to subsection (5) of section 80G to the Principal Commissioner or Commissioner authorized by the Board; or
In Form No. 10AB, where the application is required to be made under the clause (ii) or clause (iii) of first proviso to subsection (5) of section 80G to the Principal Commissioner or Commissioner authorized under the said proviso.
The application under sub-rule (1) shall be amid the subsequent documents, as needed by Form Nos. 10A or 10AB, because the case could also be, namely: —
In case, the applicant is incorporated or established under an instrument, then the self-certified copy of that particular instrument.
In case, the applicant is incorporated or established other than under an instrument, then the self-certified copy of the document evidencing the establishment of the applicant;
Self-certified copy of registration certificate, being obtained from the Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts.
Self-certified copy of registration certificate, being issued under Foreign Contribution (Regulation) Act, 2010(42 of 2010), where the applicant is registered under this Act;
Self-certified copy of the order, providing for the registration granted under section 80G(5)(vi).
Self-certified copy of order, providing for the rejection of application made under section 80G(5)(vi).
In case, the applicant has been breathing during any year or years before the year within which the liability for registration arises, then self-certified copies of the annual accounts of the applicant regarding such prior year or years (not being quite three years immediately preceding the year within which the said application is made) that such accounts are made up;
Detailed list of the activities to be undertaken by the applicant.
Once the application is received in Form No.10A, the Principal Commissioner or Commissioner who have been authorized by the Board, shall pass an order in writing granting, providing for approval under Section 80G, in form 10AC and issue a sixteen-digit alphanumeric URN to the applicants making application as per clause (a) of the sub-rule (1).
CONDITION FOR ONLINE REGISTRATION UNDER SECTION 80G (5)
For approval under section 80G (5) the subsequent conditions mentioned in Section 80G (5) vi are to be fulfilled:
The NGO mustn’t have any income which don’t seem to be exempted, like business income. If, the NGO has business income then it should maintain separate books of accounts and may not divert donations received for the aim of such business.
The bylaws or objectives of the NGOs shouldn’t contain any provision for spending the income or assets of the NGO for purposes apart from charitable purposes.
NGO shall not work for the good thing about particular religious community or caste.
The NGO will be required to maintain proper and regular books of accounts of their receipts & expenditures.
Donor-wise details to be maintained and every one donor will should tend a certificate.
Tax deductions under section 80G won’t be available to donors who go for reduced rate of tax.
AFTER REGISTRATION COMPLIANCES
Maintenance of proper books of accounts, as per the format, being prescribed under the law.
Filing of tax return on and before the respective due date and get the books of accounts audited by Chartered Accountant.
Strictly follow the rules subject to which registration has been granted
Furnishing of required details as per Rule 18AB for every yr
Issuance of certificate under section 80G, to the donors in the prescribed Form 10 BE.
CONCLUSION
Registration under the Section 12AB allows the Non-Profit Organization an exemption from tax rates. Failing to try to will make them applicable for ITR filling.
The 80G section, on the opposite hand, ensures that an individual donating to the NGO can deduct the quantity from their taxable income, which ends up in more donations.
From 1st October 2020, the new provisions will inherit effect, as a result of which each trust or Institution which are already breathing will should mandatorily renew the certificate granted under section 12A, 12AA, 80G or section 35 within the limit prescribed which is latest by 31st December 2020.
In case of latest Trusts or Institutions they’re going to should apply for registration under section 12AB within the closing date prescribed.
Similar amendment in registration/ renewal procedure has also been made in section 80G. Thus, the prevailing trusts/ institutions will now should apply for fresh registration under section 80G within the same manner as applicable in section 12AB. Such an application will be required to be made in Form No. 10A or 10AB.
An important change, being newly introduced is that the trusts or institutions already registered u/s 80G, will now be required to furnish a press release containing details of donations received during the year in Form No. 10BD within the prescribed manner.
Moreover, the trust or institution will also be required to issue a certificate of donation to their donors in Form No. 10BE.
Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders.
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