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Section 12A Income Tax Act

The Income Tax Act, 1961, entails certain provisions that allow non-profit entities to claim tax exemption. Section 12A of the Act enables certain organizations to claim a one-time exemption on the income tax to be paid. Trusts, NGOs and Section 8 Company with 12A registration can enjoy this exemption on their surplus income. It is vital for all Trusts, NGOs and other not-for-profit organizations to be aware of Section 12A and obtain registration under the same, soon after their incorporation.

Benefits of 12A Registration

The benefits of 12A registration are as under:

  • Income received is exempted from taxation. - The registered entity can avail benefits for accumulating or setting aside income, provided it is not greater than 15%.
  • Benefits of registration have been extended by the Finance Act 2014 for the trusts and institutions registered under Section 12AA.
  • The registration made under Section 12A is a one-time registration. Once the registration is made, it stays active until the date of its cancellation. The entity does not have to renew the registration.

Who is Eligible for 12A Registration?

Only charitable trusts, societies, religious trusts and Section 8 company are eligible for 12A registration. Private or family trust cannot apply for this registration.

Documents Required for Registration

Along with submitting a filled-up Form 10A, the entity must provide certain key documents to file for Section 12A registration. Following are some of the documents that must be provided for registration purpose:

  • Certified copy of the instrument under which the trust/institution was created/established, if applicable
  • Certified copy of the document evidencing the creation of the trust or the establishment of the institution, if applicable
  • Certified copy of registration with RoC/Registrar of Firms & Societies/Registrar of Public Trusts, whichever applicable
  • Certified copy of the documents evidencing adoption or modification of the objects, if any
  • Certified copy of the annual reports of the trust/institution for a maximum three immediately preceding financial years, if applicable
  • Note on activities
  • Certified copy of existing order granting registration under section 12A or section 12AA, if any.
  • Certified copy of order of rejection of application for grant of registration under section 12A or section 12AA, if any.

Source: Income Tax Department

Procedure for Registration Under Section 12A

The procedure for registration as under Section 12AA of the Income Tax Act is as under: “The Chief Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall—

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he;-

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution”

How to File Form 10A

The steps that one would need to follow to file Form 10A are as under: Step 1: Log on to E-filing portal of the Income Tax Department

Step 2: Go to E-file menu and select Income Tax Forms

Step 3: Choose Assessment Year and Form 10A from the drop-down list.

Step 4: Select the submission mode as Prepare and submit online from the drop-down list and press on continue

Step 5: Click on the submit button to complete the process

Amendment to 12A

A new clause (ab) was inserted in sub-section (1) of Section 12A of the Income Tax Act, 1961, by the Finance Act, 2017 (w.e.f. 1-4-2018):

“(ab) the person in receipt of the income has made an application for registration of the trust or institution, in a case where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)], and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;”

Source: Income Tax Department

Terms and Guidelines for NGOs and Charitable Organisations

The Income Tax Department shall cancel the registration certificate granted under Section 12A in the following cases:

  • The activities of the trust or institution are found to not be genuine.
  • The trust’s income is not utilized for the benefit of the general public.
  • The funds are put in in prohibited modes.

FAQs on Section 12A Income Tax Act

How to register a trust under Section 12A?

A trust can be registered under Section 12A by applying for it online through the Income Tax Department's website.

Who is eligible to apply for 12A certificate?

Charitable trust, society, religious trust, society, and Section 8 company, which have been formed to provide benefits to the public, can apply for 12A Certificate.

What is Form 10A?

Form 10A is “Application for registration of charitable or religious trust or institution under clause (aa) or clause (ab) of sub-section (1) of section 12A of the Income-tax Act, 1961”

Can applications be filed under Section 12A and 80G of the Income Tax Act together?

Yes, it is possible to file applications under Section 12A and 80G together.

How is Section 12A different from 12AA?

Section 12A of the Income Tax Act provides "Conditions for applicability of sections 11 and 12", while Section 12AA contains the procedure for registration under Section 12A.

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