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Benefit of section 12A or AB and 80G registration are granted to NGo's which can be in the form of Society, Trust or Section 8 Company
About 12A/12AB or 80G registration Any NGO, a Section 8 orgnisation or charitable trust can apply for registration under Section 12A if it wants to get an exemption from income tax. Without the 12a certificate for NGO, the receipts of the NGO will be entitled to normal tax rates.
On the other hand, a registration under section 80G of the Income Tax Act provides tax benefits (80G deduction) to the donor of an NGO.
You can apply for both the 12A certificate for NGO and registration under section 80G together or separately. If you wish to apply for them separately, you must apply first for 12A registration. As per the Income Tax Act, 1961, 12A registration is a must if you want to apply for registration under 80G.
Features of of 80G and 12A or 12AB Registration
*More capital allowed for charitable activities through tax exemption over NGO income.
*Funds and Grants are permitted from recognized Agencies, Government and International sources.
*ONLY 12A and 80G registered NGOs are permitted to accept International funding with exemptions available under Foreign Regulation Act, 2010 or FCRA.
*Attracts the donor towards donating.
*More operational exposure and status value when the NGO is registered and obtains 12A and 80G registration.
*Further, it can avail benefits of the FCRA Registration.
*The validity of the registration granted under section 12AB shall be for five years except in the case of provisional registration which shall be valid forthree years. All registrations made under section 12AB are required to berenewed as specified under new scheme of registration.
*Registration is Mandatory: Registration under section 12A is a mandatory pre-condition to avail income-taxexemptions. Income of trust would not be exempt unless it has obtainedregistration under section 12A. In New Life in Christ Evangelistic Association v.CIT[2000] 111 Taxman 16 (Mad.),it was observed that without section 12Aregistration, benefits under sections 11 and 12 of the Act were not available.
*Mere registration does not entitle exemption: Section 12A provides the pre-conditions for availing exemptions under the Act. Ithas to be understood that registration is mandatory for
availing exemptions butmere registration does not entitle the organisation to claim exemptions.Exemptions are available subject to various other conditions as are specified inthe Act. In
the case of CITv.Red Rose School[2007] 163 Taxman 19 (All.), it was heldthat registration under section 12AA does not necessarily entitle the assessee toget the income excluded from the income of the previous year for the purpose ofdetermination of tax liability. It only entitles the assessee to claim suchexemptions which otherwise could not be claimed in the absence of registration.
*Conditions of Registration are to be satisfied: In CIT v. U.P. Forest Corpn. [1998] 97 Taxman 259 (SC), it was held that anorganisation has to get itself registered in order to avail the exemption undersection 12 but whether the income of the institution can be regarded as beingheld for charitable purpose, requires investigation of facts and the High Courtcannot, in writ proceedings, grant exemption to the assessee under section 11. InM. Visvesvaraya Industrial Research & Development Centrev.ITAT [2001] 116 Taxman760 (Bom.), it was held that before a trust can claim exemption, it has to satisfythe pre-condition of registration. Further, registration in itself does not conferany right to exemptions.
*Registration is a condition precedent for availing exemption: In the case of U.P. Forest Corporation v. Dy. CIT [2007] 165 Taxman 533 the SupremeCourt observed that a conjoint reading of sections 11, 12 and 12A makes it clearthat registration under section 12A is a condition precedent for availing of benefitunder sections 11 and 12. Unless and until an institution is registered undersection 12A, it cannot claim the benefit of section 11(1)(a). Keeping in view the factthat the assessee had not been granted registration under section 12A, it was notentitled to claim exemption from payment of tax under sections 11(1)(a) and 12.
Overview of New Scheme of registration under section 12AB w.e.f. 1st April, 2021
1.The Finance Act, 2020 has made changes leading to complete overhaul in the registration process of charitable and religious organisations. The procedure for registration of every
organisation under the new scheme shall becompletely electronic under a centralised database.
2.The Income-tax Department shall issue a National Unique RegistrationNumber to all the charitable and religious institutions and thereby creating aNational Database of exempt entities.
3.One of the conditions to claim exemption under sections 11 and 12 was toobtain a registration under section 12A/12AA.
4.Finance Act, 2020 inserted a new section 12AB, dealing with freshregistrations effecting from 1st October, 2020.
5.As per the present scheme of registration effecting from 1st October, 2020, theregistrations can be divided into following categories:
A.Existing trusts/institutions registered under section 12A/12AA needs to bere-registered under section 12AB.
B.Provisional registrations and the process of converting the provisional registration into a normal registration.
C.Renewal of Registration granted under section 12AB:
a.Registration granted under section 12AB (other than provisional registrations)
b.Re-registration for confirming the modification of object clause.
c.Registration to be made operative if it becomes inoperative due toapproval under section 10(23C)/10(46).
6.The validity of the registration granted under section 12AB shall be for five years except in the case of provisional registration which shall be valid forthree years. All registration
granted under section 12AB shall be subject torenewal as specified under new scheme of registration. The text of sections12A, 12AA and 12AB is reproduced as under:
The notification dated 26.03.2021 of CBDT can be accessed at below link https://www.incometaxindia.gov.in/communications/notification/notification_19_2021.pdf
Documents Required
where the applicant is created, or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant;
where the applicant is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;
self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010(42 of2010), if the applicant is registered under such Act;
self-certified copy of existing order granting registration under section 12A or section 12AA or section 12AB, as the case may be;
self-certified copy of order of rejection of application for grant of registration under section12A or section 12AA or section 12AB, as the case may be, if any;
self-certified copies of the annual accounts max 3 preceding years;
self-certified copies of the annual accounts of such business undertaking specified u/s 11(4) and audit report if any
self-certified copies of the annual accounts of such business undertaking specified u/s 11(4A) and audit report if any
self-certified copy of the documents evidencing adoption or modification of the objects;
note on the activities of the applicant.
FAQS
Whether all NGO (Trust/Society/Section 8 Company) are required to file application for Registration under new rules?
Yes, All NGO already registered under section 80G,12A,12AA or 10(23c) or section 35(1) are required to file fresh application for registration under the specified form and manner.
What type of form available for registration?
Form 10A (With new format) and Form 10AB are available on portal in respective cases.
What are the case When the application in new form 10A is to be filed and what is the time limit?
Application in Form No. 10A to be file under the below mentioned sub-clause (i) or (vi) of clause (ac)of sub-section(1) of section 12A to the Principal Commissioner or Commissioner authorised by the Board .
Clause 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 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (12 of 2020)], within three months from the1st day of April, 2021;(I.e., Case of migration from old registration to new registration)
Clause 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, (I.e., case of New fresh registration under different sections)
What are the case When the application in new form 10AB is to be filed and what is the time limit?
Application in Form No. 10AB to be file under the below mentioned sub-clause (ii) or (iii) or (iv) or (v) of clause(ac)of sub-section (1) of section 12A to the Principal Commissioner or Commissioner under the said clause.
Is the registration granted under section 12A or 12AB is for lifetime?
No, the concept of life time registration under all provision abolished.
For how many years registration is granted under section 12A or 12AB?
- where the application is made under sub-clause (i) under clause(ac) of sub-section (1) of section 12A, pass an order in writing registering the trust or institution for a period of five years;
- where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause, pass an order in writing registering the trust or institution for a period of five years after satisfied with requirement and investigation;
- where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought.
Whether applicant can select Yes/No in the field “Has return of income been filed for the last assessment year for which the due date has expired”?
No, applicant is not required to select Yes or No in this field as the field is non-editable and data for this field is pre-filled by the system itself. “Yes” is auto populated if return of income has been filed for the latest Assessment year i.e., AY 2020-21 for the relevant PAN and AY combination. Else, the system will auto-populate “No”.
Is it possible to obtain registration under multiple sections such as Section 10(23C) and Section 80G of the Income-tax Act, 1961 by filing a single application in Form 10A?
No. Applicant needs to file a separate application in Form 10A by selecting the relevant section code from Section Code list.
When the provisional registration to be issued?
According to section 12AB, Provisional registration (FORM 10AC) being issued in case of first-time new registration u/s 12A(1)(ac)(i) for 3 years. In all other case registration being issued for 5 years.
What will be status of our pending application as on 31st March 2021?
The Finance Act, 2020 prescribes that all pending applications for registration shall be considered as applications under new section 12AB and hence, applicants making such applications are not required to apply again. However, such applications shall be granted provisional registration and technically will not be eligible for exemptions for the year in which the application was made as explained below.
What is the position if such organisation does not apply for renewal of registration?
such organisation shall be deemed to have surrendered their registration and forfeited their right to claim the applicability of sections 11 & 12. Therefore, such organisations shall be taxed as an normal assessee and five heads of income of shall apply.
What are those section in which Application in form 10A and 10AB apply?
*clauses (i), (ii), (iii) and (iv) of first proviso to clause (23C) of section 10
*Ninth proviso to clause (23C) of section 10
*sub-clauses (i) (ii), (iii), (iv), (v) and (vi) of clause (ac) of sub-section (1) of section 12A
*sub-section (3) of section 12AB
*First and fifth proviso to sub-section (1) of section 35
*sub-section (1A) of section 35
*clauses (i), (ii), (iii) and (iv) of first proviso to sub-section (5) of section 80G
*Third proviso to sub-section (5) of section 80G
*clauses (viii) and (ix) of sub-section (5) of section 80G.
A charitable trust has obtained registration under Section 12A of the Income-tax Act, 1961. Now, it wants to obtain registration under Section 80G of the relevant act. Is it required to file a new application in Form 10A?
Yes. For each unique section code as specified in section code list in Form 10A, applicant is required to file a separate application in Form 10A.
A trust is already registered under Section 10 (23C) of the Income-tax Act, 1961. It wants to obtain registration under Section 12A of the relevant act. Is it eligible to file Form 10A in such a case?
No, If the applicant is already registered under Section 10(23C) of the Income-tax Act, 1961, he is not eligible to obtain registration under Section 12A of the relevant act and hence, he will not be allowed to file Form 10A for Section 12A registration.
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