12A registration is a one-time registration which is granted by the Income Tax Department to trusts and other not for profit organisations. The purpose of the registration is to be exempted from the payment of income tax. Section 12A deals with registration of trust and section 12AA deals with procedure for registration of trust. 12A registration is generally applied for immediately after incorporation.
Section 8 Companies, Trusts and NGOs which have obtained 12A registration enjoy exemption from paying income tax on their surplus income. The 12A registration facility is available for all non-profit entities. Hence, it is necessary for all Trusts, NGOs and other Not-for-Profit organisations to be aware of Section 12A of the Income Tax Act. Once the registration is granted, it will hold good till the cancellation of registration.
The benefits of Section 12A Registration are the following:
• The fund used for charitable or religious purposes is considered to be the application of the income. The income application refers to the expenses used for charitable or religious purposes for calculating the taxable income of the not-for-profit organisation.
• The income received will be free from the charge of Income Tax.
• 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 entitled to provide grants to NGOs which have obtained registration under this section.
• The registration which is granted under Section 12A shall be treated as a one-time registration. Once the registration is made, the registration will be active until the date of cancellation.
• There is no requirement to renew the registration periodically. Hence, the registration benefits can be claimed NGO as and when the requirement arises.
Form 10A is a form which should be filed by entities which wish to make a registration under Section 12A. The process for applying for Section 12A registration and the process of Form 10A filing has been made exclusively online. The process of making online filing is possible only with a digital signature. For making an application under Section 12A, the digital signature of the founder or author of the trust should be affixed.
To obtain registration under Section 12A, an application in Form 10A for registration of a charitable or religious trust or institution can be made. The application should compulsorily be made in the online mode. The application shall be addressed to the Commissioner of Income Tax along with the necessary documents.To obtain registration under Section 12A, an application in Form 10A for registration of a charitable or religious trust or institution can be made. The application should compulsorily be made in the online mode. The application shall be addressed to the Commissioner of Income Tax along with the necessary documents.
1. Self-certified copy of Trust Deed or Instrument, where the trust is created under an instrument.
2. Self- certified copy of the document evidencing the creation of the trust, where the trust is created, otherwise than under an instrument.
3. Self-certified copy of registration with Registrar of Companies (RoC) or Registrar of Firms and Societies or Registrar of Public Trusts.
4. Self-certified copy of the documents evidencing adoption or modification of the objects, if any;
5. Annual financial statements for three preceding financial years
6. Note on the activities conducted by the entity
7. Self-certified copy of the existing order granting registration under section 12A or section 12AA, if any.
8. Self-certified copy of the order of rejection of an application for grant of registration under section 12A or section 12AA, if any.
• The assessee is required to submit the application in the required format online. After the application has been submitted, the Commissioner may request the applicant to submit additional information or documents as needed. The Commissioner may make the request in case there is a need to satisfy the Income Tax Department about the genuineness of the activities undertaken by the trust.
• The Commissioner may be satisfied with the application. In such cases, the Commissioner will pass a written order mentioning that the assessee is eligible to obtain registration under the section. The written order is forwarded to the assessee. On receipt of the order, the assessee can obtain the privilege of registration under the section.
• The commissioner may not be satisfied with the application. In such cases, the right is available with the Commissioner to reject the application. The assessee should be informed in writing of the reason for the rejection.
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