A Comprehensive Guide to 12A Registration for Charitable Trusts and Non-Profit Organizations in India

Introduction

The 12A Registration is granted by the Income Tax Authority to the Charitable Trust & Non-Profit Organization; the said registration is done for exempting tax. The companies registered under Section 8 of the Companies Act 2013, such as trusts, charitable organizations, and non-profit organizations, are covered under the scope of Section 8 of the Companies Act. The Income Tax Act has introduced various provisions related to the tax exemption for this type of incorporation, such as Sections 12A, 12AA & 80G of the said Act.

Benefits of 12A Registration

1. Income received by the said organizations is tax-free
2. A person registered under 12A can accumulate or set aside the income; however, the income that ought to be set aside should not be more than 15% of the income received by the said institutions.
3. The NGOs registered under 12A of the Income Tax Act will be eligible to grant funds from the domestic & international sources.
4. It is a one-time registration will be valid until cancellation
5. No requirements to renew the registration periodically

Eligibility for registration under 12A

1. The Applicant Institution should be covered under the scope of the definition of charitable purpose, which includes relief for the poor class, education, medical & activities for preserving the environment & any other activities related to public utilities.
2. The Institution shall not work upon profit enhancement
3. The applicant institution should not be involved in trade practices
4. The applicant organization is not a private or family trust

Documents required for registration

1. A self-certified copy of the instrument that was used to create the trust or establish the institution shall be submitted.
2. The institution or trust may have been created otherwise than by way of drafting and registering an instrument. In such cases, a self-certified copy of the document evidencing the creation of the trust or establishment of the institution should be submitted to the Income Tax Department.
3. It is necessary to submit a self-certified copy of the registration, which was made with the applicable body. The applicable body may be the Registrar of Companies, the Registrar of Firms and Societies, or the Registrar of Public Trusts.
4. A self-certified copy of the documents that provide evidence for adoption or modification of the objectives of the entity shall be submitted.
5. Annual financial statements for three preceding financial years
6. Note on the activities conducted by the entity
7. In certain cases, the Income Tax department may cancel the registration granted under this section. After rectifying the default, the assessee is allowed to make a subsequent application. In such cases, it is necessary to submit a self-certified copy of the existing order granting registration.
8. The assessee may have previously applied for registration under this section. The application may have been rejected. In such cases, a self-certified copy of the order of rejection should be attached with the application.

Procedure for Registration

Step 1: Log in to the Income Tax e-portal.

Step 2: Select the “Submit/Return” option from the navigation menu.

Step 3: Log in to the account using ID & Password.

Step 4: Select "e-file," then select “Income Tax Forms” from the drop-down menu.

Step 5: Select Form 10A

Step 6: Select the relevant “Assessment & Submission” year.

Step 7: Fill in the required details.

Step 8: Click on Submit.

Step 9: After the submission is done, the IT Commissioner will inspect the application.

Step 10: Submit the additional details if required by the Commissioner.

Step 11: After the Commissioner is satisfied, the order for registration under 12A will be procured.

Article by

Farhan Hashmi, fresher, working as a legal research intern at Corpzo

FCRA Registration Read More

Section 8 registration Read More

Trust Registration: Read More

Society's Registration Read More

12A & 80G registration Read More