12A Registration under Income Tax Act

The Finance Act, 2020, introduced the new concept of 12A Registration under Income Tax Act of all existing and new charitable trusts, institutions and NGOs. Therefore, Existing registered trusts, entities, and NGOs were required to convert to the new registration system under Section 12AB.

The Income Tax Authority has granted provisional registration to trusts and other non-profit organizations. The purpose of this registration is to exempt them from paying income tax. After incorporation, 12A registration can generally be applied for. Section 8 Corporations, trusts, and NGOs that have obtained 12A registration are exempt from paying income tax on their excess income. Furthermore, 12A registration is available for all nonprofit entities. Therefore, it is necessary for all trusts, NGOs and other nonprofit organizations to know Section 12A of the Income Tax Law.

Section 12A Prescribes the conditions for availing the benefits under section 11 and 12.

Section 12AB Prescribes the procedure framework for registration. In addition, It also prescribe the procedure to avail the exemption under section 11 and 12. (introduced w.e.f AY 2022-2023).

Form 10A Prescribes the procedure framework for registration. In addtion, It also prescribe the procedure to avail the exemption under section 11 and 12. (introduced w.e.f AY 2022-2023).

Key Feature of 12A Registration under Income Tax Act:

One of the main features of the new registration procedure is that provisional registration is possible for a period of three years without detailed examination by the prescribed income tax authority, even if the activity of the company has not yet started.

Key objectives of amendments or new registration process:

• Need improvement with the advent of technology. Keeping in mind, the practical issue of difficulty in obtaining registration before actually starting the activities. In the past, the process of the registration was manual and scattered all over the country.
• To make the process of registration completely electronic. Moreover, 16 digit Unique Registration Number (URN) shall be issued to all new and existing trust or institutions.
• Approval or registration or notification for exemption should also be for a limited period, say for a period not exceeding five years at one time.
• To ensure that the conditions of approval or registration or notification are adhered to for want of continuance of exemption.
• To facilitate the registration of the new charity institution which is yet to start their charitable activities. Therefore, It allow them provisional registration for three years.
• To cross-check claim of donation by donor.

Benefits of 12A Registration under Income Tax Act:

• The person who is registered under Section 12A can avail benefits of section 11 of Income Tax Act.
• The person who is registered under Section 12A can avail benefits for accumulating or setting aside income. However, the income which is set aside should not be more than 15% of the amount applied towards charitable or other non-commercial purposes.
• The accumulation of income which is considered to be the income application shall not be included in the assessee’s total income.
• NGOs are entitled to receive grants as funds from domestic and international sources. These agencies are however entitled to provide grants to NGOs who have obtained registration under this section.

Documents required for Filing Form 10A

• self-certified copy of the instrument/document evidencing the creation, or registration or establishment of the applicant. It may be Trust Deed or Registration certificate provided by Registrar of Firms and Societies or Registrar of Companies.
• self-certified copy of existing order granting registration under section 12A/12AA/12AB, as the case may be;
• where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up.
• Where any application under section 12A or section 12AA or Section 12AB has been rejected in past, self-certified copy of the order rejecting the application passed by the Income Tax Authorities.
• Details of Author / Founder / Settlor / Trustees / Member of Societies like PAN or Aadhar or Passport or Driving License or Ration Card.
• If applicant is registered on Darpan Portal than, Self-certified copy of certificate of registration.
• If applicant is registered under Foreign Contribution (Regulation) Act than, self-certified copy of registration certificate.

Process of Registration:

Step 1: The applicant (a trust, corporation or other institution) must apply for registration through the Income Tax Portal using its income tax filing information in Form No. 10A (or 10AB). The applicant must submit other documents as listed above in this article.

Step 2: On receipt of an application in Form No. 10A (or 10AB as the case may be), the Principal Commissioner or Commissioner, authorized by the Board:

In case of applicant who is already registered u/s 12AA or in case of Provisional Registration where Form 10A has been submitted. Order in writing has been passed for granting registration in Form No. 10AC. 16 digit alphanumeric Unique Registration Number (URN) also issued to the applicants.

In other cases i.e. where Form 10AB has been submitted. The order of registration or rejection or cancellation of registration shall be passed in Form No.10AD. 16 alphanumeric number Unique Registration Number (URN) shall be issued, if the registration is granted.

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