Section 12A of the Income Tax Act: Complete Guide to Registration for Charitable Trusts and NGOs
Charitable trusts, non-profit organizations (NPOs), non-governmental organizations (NGOs), religious institutions, and Section 8 companies are required to register under Section 12A of the Income Tax Act to qualify for tax exemptions on income and donations. Without this registration, income received from donations or welfare activities is treated as taxable under the Income Tax Act, 1961.
Importance of Section 12A Registration
The Income Tax Act provides exemptions to charitable and religious entities under Sections 11 and 12.
- Section 11 exempts income generated from property used for charitable or religious purposes.
- Section 12 exempts voluntary contributions or donations received by such institutions.
For example, if an NGO receives a voluntary contribution of Rs 10 lakh but is not registered under Section 12A, this amount will be taxed as income. Registration ensures that the income of charitable institutions is used entirely for social welfare without tax liability.
Key Amendments: Section 12AB under Finance Acts 2020 and 2022
The Finance Acts of 2020 and 2022 introduced crucial reforms for charitable and religious institutions. Below is a summary of major updates:
| Particulars | Amendment | Effective From |
|---|---|---|
| Maintenance of Books of Accounts | Mandatory if total income exceeds Rs 2.5 lakh | FY 2022-23 |
| Audit Requirement | Compulsory if income exceeds exemption limit; Form 10B/10BB filing simplified | AY 2023-24 |
| Utilisation of Accumulated Funds | 85% of income must be used for charitable purposes annually; unspent funds taxable | FY 2022-23 |
| Application of Income on Payment Basis | Expenses must be paid by March 31 to qualify as application of income | FY 2021-22 |
| Tax on Specified Incomes | Violations taxed at a flat 30% rate | FY 2022-23 |
| Re-Registration Mandate | All existing trusts must reapply for registration (valid for 3 years provisionally) | April 1, 2021 |
These updates aim to enhance transparency and ensure that charitable funds are genuinely utilized for public welfare.
Documents Required for Section 12A Registration
To obtain registration under Section 12A of the Income Tax Act, organizations must prepare and upload the following documents:
- Certificate of registration with the Registrar of Companies (ROC) or Registrar of Societies.
- PAN card of the trust or NGO.
- Address proof — utility bill, rent agreement, and NOC from the property owner.
- KYC details of members or trustees.
- Self-certified copy of the trust deed or establishment document.
- Activity report detailing the charitable or religious work undertaken.
- Copies of financial statements and balance sheets.
- Proofs supporting the charitable nature of activities.
- Copies of prior registration orders under Section 12A, 12AA, or 12AB (if applicable).
- Rejection or approval order, if reapplying.
Online Registration Process for Section 12A (Form 10A)
The registration process is fully digital and must be submitted through the Income Tax Department portal. Follow the steps below:
- Visit www.incometax.gov.in.
- Log in using the organization’s credentials.
- Go to ‘e-File’ ? ‘Income Tax Forms’ ? ‘File Income Tax Forms’.
- Under ‘Persons not dependent on any source of income’, select Form 10A.
- Choose the Assessment Year and click ‘Prepare and Submit’.
- Fill out all relevant details and upload supporting documents.
- Submit using Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).
Once approved, the trust or NGO receives a registration certificate under Section 12A, which validates its eligibility for tax exemption.
Major Benefits of Section 12A Registration
- Tax Exemption: Registered entities can claim full tax exemption on income applied to charitable activities.
- 15% Income Rebate: A 15% rebate is allowed on surplus income reinvested in charitable or welfare projects.
- Eligibility for Government Grants: Registration is mandatory for receiving government or CSR funding.
- Public Credibility: Enhances the trustworthiness of NGOs and charitable institutions.
- Legal Recognition: Provides official acknowledgment of the institution’s charitable status.
It’s important to note that private or family trusts are not eligible for registration under Section 12A.
Conclusion
Registration under Section 12A of the Income Tax Act is essential for all charitable and non-profit organizations in India. It not only provides tax benefits but also enhances transparency, accountability, and credibility. With amendments under the Finance Acts of 2020 and 2022, the registration process has become more streamlined and digital, ensuring that only genuine organizations receive these benefits.
For detailed guidance, visit the official Income Tax Department website or consult a qualified tax professional to ensure compliance with all applicable rules.
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