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Registrations of trusts and NGOs under 12A | Company Vakil

What is registration under 12A of the Income Tax Act, 1961?

It is a registration done by NGOs to get a chunk of the organization’s income exempted from tax. After the 12A registration, certain income taxes are exempted from taxation.

What kind of income is exempted after company registration in India?

All the Trusts and NGOs which have a 12A registration are exempted from paying income tax on the surplus amount.

What are the benefits of registering an NGO or Trust?

The various benefits of NGO registration and trust registration in India under 12A are as follows:

1) The income applied for charitable or religious purposes will be considered as an application of income i.e. expenditure incurred for a charitable or religious purpose and will be allowed while computing income of the trust.

2) The benefit of accumulating or setting aside of income not exceeding 15% for a charitable or religious purpose is made available.

3) The accumulation of income, which is deemed as an application of income as per section 11(2), shall not be included in the total income.

4) The NGO’s receive various grants from government and other agencies. They are eligible to get grants and financial funding from various agencies which generally provide grants to 12A registered NGO’s.

5) There is an additional benefit in Section 80G registration for which the NGOs have to apply separately.

6) A benefit in FCRA (Foreign contribution and regulation act) registration is made available through 12A registration. All the NGO’s which are seeking foreign contributions must obtain an FCRA registration from the Ministry of Home Affairs.

The above benefits would not be available to any trust or institution which had applied for registration and was refused the same under section 12AA or a registration once granted was canceled.

What kind of institutions is eligible for registration?

Charitable Trusts, Religious Trusts, Societies, and Section 8 Companies are eligible for registration under 12A. Private or family trusts are not eligible for the same.

When can you apply for 12A exemption certificate?

Exemption certificate under Section 12A can be applied immediately after the registration of NGO.  The applications are to be filed with the commissioner of Income-tax having jurisdiction over the institution.

What is the process of registration?

Registration under section 12A is one-time registration. Once the registration is granted to the trust, it will hold good till the cancellation of registration. There is no provision which requires any renewal of registration. Thus, the benefits of registration can be claimed for a lifetime by an NGO or a trust.

The process of registration is as follows:

  1.  The application shall be made in Form 10A to the Income Tax Commissioner.
  2.  The application shall contain the following documents:
    •  Duly filled in Form – 10A for registration u/s 12A registration
    • List of names, addresses and pan details of the trustees/managers
    • A certified true copy of the instrument (registration certificate) under which the trust/institution was created/established.
    • A certified true copy of the document (Trust deed/MOA and AOA) which is evidence of such institution/trust creation.
    • A copy of the PAN card of NGO/trust.
    • Evidence of welfare activities carried out & progress report since inception or immediately preceding years.
    • Certified copy of the existing order granting registration under section 12A or section 12AA, if any.
    • Certified copy of the order of rejection of an application for grant of registration under section 12A or section 12AA, if any.
  3.  Once the application made by the NGO/trust for registration in the specified format to the Commissioner of Income-tax, the commissioner shall review the same. On review of the application, the commissioner may ask for additional information or documents which needs to be submitted within the stipulated time. The request for additional information or documents would be to satisfy the Commissioner as to the genuineness and legality of the activities of the Trust or Institution.
  4.  On satisfaction of all the information in the application, the Commissioner shall pass an order in writing registering the NGO/trust under Section 12A of The Income Tax Act. If the application is unsatisfactory, the commissioner may reject the application.

The registration process may take time up to 3 to 4 months. The registration once done is valid for a lifetime.

Below is the Sample of form 10A for 12A registration.

The Income Tax Department has passed a notification on 19th February 2018 with respect to the updated procedure for applying for 12A registration. The specimen of the copy is attached below : 

In conclusion,

12A provides for various tax benefits for company registrations in India who register themselves as NGOs or trusts. 80G filed along with 12A provides for additional tax benefits that every NGO should avail.Company Vakil is a leading registration platform that can help you in your business registration 

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