Section 12AB of Income Tax Act- Know the provision and procedure

Finance Act 2020 has introduced a new “Section 12AB” for significant changes in compliance and registration procedures of Religious and Charitable Trusts/institutions. Under the new regime, amendments of Section 10(23C), Section 11, Section 12A, Section 12AA, Section 80G, and insertion of a new Section 12AB were proposed. Under this article, we will understand the provision of Section 12AB of Income Tax Act, 1961.

Section 12AB of Income Tax Act

Under the new registration regime brought in by Finance Act 2020, the Concept of Perpetuity has been done away with i.e. “All the existing charitable trust or institutions registered under section 12A, section 12AA and 80G of the Income Tax Act”, will have to apply afresh for registration under the new provision of section 12AB of Income Tax Act on or before 1st January 2022 till 31st March 2022.

What is the amendment made by Finance Act, 2020

Finance Act 2020, made the following amendment u/s 11 of Income Tax Act, 1961

In Section 11 of the Income Tax Act, in subsection (7), with effect from the 1st June 2020, –

(a) for the words, brackets, letters, and figures “under clause (b) of sub-section (1) of section 12AA”, the words, figures and letters “under section 12AA or section 12AB” shall be substituted;

(b) for the words, brackets, figures, and letter “clause (1) and clause (23C)”, the words, brackets, figures and letter “clause (1), clause (23C) and clause (46)” shall be substituted;

(c) the following provisos shall be inserted, namely:––

“Provided that such registration shall become inoperative from the date on which the trustor institution is approved under clause (23C) of section 10 or is notified under clause (46) of the said section, as the case may be, or the date on which this proviso has come into force, whichever is later:

Provided further that the trust or institution, whose registration has become inoperative under the first proviso, may apply to get its registration operative under section 12AB subject to the condition that on doing so, the approval under clause (23C) of section 10 or notification under clause (46) of the said section, as the case may be, to such trust or institution shall cease to have any effect from the date on which the said registration becomes operative and thereafter, it shall not be entitled to exemption under the respective clauses.”.

Also Read:- What is Section 80G and How to Get Tax Benefits under Section 80G of Income Tax Act

Who is required to register under section 12AB of Income Tax Act

To continue availing exemption under section 10 or 11 (as the case may be), all the existing charitable and religious institutions (including NGOs) which are registered or approved under the following section

  • Section 12A
  • Section 12AA
  • Section 10(23C)
  • Section 80G

are compulsorily required to move to section 12AB for fresh registration.

Why all the trust needs to get register under Income Tax again?

The Finance Bill 2020, wants to consolidate all trust data to provide an electronic database. There are many old trusts registered, however have misplaced their registration number nor does the Income Tax Department have any record of the same.

Must Read:- Know the complete for Registration under section 12A and 80G of the Income Tax Act

What will be the validity of Old Registration u/s 12A, 80G, etc?

As a result of registration under section 12AB of Income Tax, old registration under sections 80G, 12A, and other related sections will cease to exists and a new section 12AB will come into force w.e.f.-

  • The date of grant of registration under section 12AB of Income Tax Act.
  • The last day by which the application for registration and approval is required to be made.

whichever is earlier.

Registration under section 12AB of Income Tax Act.

The following points will help you to get registered u/s 12AB.

What is the time limit for registration under section 12AB

12AB Registration Time Limit– On consideration of difficulties reported by the taxpayers and other stakeholders in electronic filing of certain forms under the provision of Income Tax Act, 1961 read with Income Tax Rules, 1962, The CBDT vide circular no. 16/2021 dated 29th August 2021, extends the due dates for electronic filing of such forms including Form No. 12AB as under-

S.No.Nature of Forms/ExtensionProvisions of Income TaxOriginal Due Dates Extended due dates vide Circular No. 16/2021
1.The application in Form No. 10A for registration/intimation/approval of Trusts/Institutions Research Associations etc.U/s 10 (23C), 12A, 12AB, 35(1) (ii)/(iia)/(iii) and 80G of the IT Act30.06.202131.03.2022
2.The application in Form No. 10B for registration of approval of Trusts/Institutions Research Associations etc. Section 10(23C), 12A or 80G28.02.202231.03.2022

Is registration of a trust under section 12AB is mandatory?

Yes, a trust must get the registration under section 12AB of Income Tax Act, 1961, to claim an exemption under section 11.

To whom the application for registration u/s 12AB shall be made?

The application shall be made online, to The Commissioner or Principal Commissioner of Income Tax who shall pass an order granting approval or rejection within three months from the date of commencement of the new provision.

For rejection, if appropriate authority is satisfied that the applicants have not complied with the objects mentioned, shall cancel the application by providing a reasonable opportunity to be heard.

Also Read- Section 40b of Income tax Act- Remuneration & Interest Paid to Partners

Form to be filed for application under section 12AB of Income Tax Act

The application u/s 12AB shall be made online by filing Form 10A and Form 10AB along with the required documents-

  • Under digital signature, if the return of income is required to be furnished under digital signature, OR
  • through electronic verification code in a case not covered for digital signature.

Form No. 10A or 10AB, as the case may be shall be verified by the person who is authorized to verify the return of Income.

What is Form 10A and 10AB required for registration under section 12AB of Income Tax Act

Form 10A- It shall be used for the following purpose-

  • Application for revalidation of registration/approval of existing organization registered/approved u/s 12A/12AA/80G.
  • Application for provisional registration/approval u/s 12AB/80G.

Form 10AB- It shall be used for the following purpose-

  • Conversion of provisional registration into regular registration.
  • Renewal of registration/approval after five years.
  • Activating inoperative registration u/s 10(23C)/10(46).
  • Reregistration for modification of objects for entities registered u/s 12.

Also Read- Standard Deduction For Salaried Individuals

Due date to apply in form 10A and 10AB

Due Date to apply in form 10A-

a) Trusts already approved/registered and their approval/registration is continuing as of 01-04-2021: On or before 30.06.2021

b) Trusts making application for provisional registration/approval: 1 month before the commencement of the previous year from which the said approval is sought.

Due Date to apply in form 10AB-

a) Conversion of provisional registration into regular registration: before 6 months of the expiry of 6 months from commencement of activities whichever is earlier.

b) Renewal of registration/approval after 5 years: Before 6 months of expiry.

c) Re-registration for modification of objects for entities registered under section 12AB: within 30 days from such modification.

Validity period of Registration

The registration granted u/s 12AB will remain valid for 5 years, however, in the case of provisional registration, it shall be valid for 3 years. All the registration granted under section 12AB shall be subject to renewal as determined under the new scheme of registration.

Registration procedure

The application for registration under section 12AB of Income Tax Act can be made by filing Form 10A online on the Income Tax Portal.

The form is available at the portal under the E-file menu > Income Tax Form Section, which will visible after login to the portal.

How to apply for registration under section 12AB of Income Tax Act

Section 12AB registration procedure for NGOs and charitable trusts- CBDT vide notification No. 19/2021 dated 26.03.2021 has notified the new registration procedure for NGOs and charitable trusts and other institutions under section 12AB and section 10(23C) of the Income Tax Act, 1961 through Income Tax (6th amendment) Rules, 2021.

It has also notified the procedure for furnishing the statement of donation received by NGO/Trust under section 80G(5). Undoubtedly, the new regime will endure better accountability & transparency for NGOs but definitely, the initial compliance burden could be felt by the NGOs of smaller size and particularly the ones in rural areas.

Registration under section 12AB of Income Tax Act, 1961– New provision introduced by the Finance Act, 2020 has removed the concept of perpetuity and have provided that even existing organizations registered u/s 12A/12AA or 80G of the Income Tax Act would have to apply for registration under section 12AB of Income Tax Act, 1961.

Documents required for registration under section 12AB of Income Tax Act

Following documents are required for filing the application form 10A or 10AB-

  • Registration Certificate and MOA/Trust deed (2 self-attested copies by the Managing Trustee)
  • NOC copy from the Landlord in case of the rented property.
  • Utility Bill Copy e.g. Electricity Bill, Water Bill, House Tax, etc. for the owned property.
  • Copy of PAN Card of Trust.
  • Evidence of welfare activity carried out and progress report of the same for the last 2 years or since inception.
  • Books of Accounts, Balance Sheet, ITR (If Any) of the last 3 years or since inception.
  • List of Donors with their PAN and Aadhar.
  • List of Governing bodies or members of the trust/Institution with the following details-
  • Name
  • Address
  • AAdhar No.
  • PAN No.
  • Mobile No.
  • Email Id
  • Trust Deed for verification of the original registration certificate, FCRA Registration Certificate (if any), and MOA.
  • Self-certified copy of existing order granting registration u/s10/12A/12AA/12AB/80G.
  • Self-certified copy of an order rejecting of application for grant of registration u/s10/12A/12AA/12AB/80G. (if any)
  • Activity report since registration or last three years.
  • self certified copies of the annual accounts with audit report since registration or of last three years.
  • Amount of expenditure incurred for religious activities since registration or of last three years.
  • Any other documents or information as asked by the department.

Conclusion

After reading all the above context, it is concluded that-

Section 12AB of Income Tax Act- From 01st January 2022, the new provisions will come into effect, as a result of which every trust or institution which are already in existence will have to mandatory renew the certificate granted under section 12A, 12AA, 80G, or section 35 with the time limit of 3 months which is 31st March 2022.

and In the case of new Trusts or Institutions, they will have to apply for registration under section 12AB of the Income Tax Act, 1961.

Frequently Asked Questions- FAQs

  1. How do I register for 12AB?

    The application for registration under section 12AB of the Income Tax Act can be made by filing Form 10A online on the Income Tax Portal. The form is available at the portal under the E-file menu > Income Tax Form Section, which will visible after login to the portal.

  2. What are the documents required for 12AB registration?

    The application for registration under section 12AB of the Income Tax Act can be made by filing Form 10A or 10B online on the Income Tax Portal. Following are the list of documents required for 12AB registration (For Form 10A or 10B filing)-

    Registration CertRegistration Certificate and MOA/Trust deed (2 self-attested copies by the Managing Trustee)

    NOC copy from the Landlord in case of the rented property.

    Utility Bill Copy e.g. Electricity Bill, Water Bill, House Tax, etc. for the owned property.

    Copy of PAN Card of Trust.

    Evidence of welfare activity carried out and progress report of the same for the last 2 years or since inception.

    Books of Accounts, Balance Sheet, ITR (If Any) of the last 3 years or since inception.

    List of Donors with their PAN and Aadhar.

    List of Governing bodies or members of the trust/Institution with the following details-
    Name
    Address
    AAdhar No.
    PAN No.
    Mobile No.
    Email Id

    Trust Deed for verification of the original registration certificate, FCRA Registration Certificate (if any), and MOA.

    Self-certified copy of existing order granting registration u/s10/12A/12AA/12AB/80G.

    Self-certified copy of an order rejecting of application for grant of registration u/s10/12A/12AA/12AB/80G. (if any)

    Activity report since registration or last three years.

    Self-certified copies of the annual accounts with audit report since registration or of last three years.

    Amount of expenditure incurred for religious activities since registration or of last three years.

    Any other documents or information as asked by the department.

  3. What is section 12AB Registration?

    Under the new registration regime brought in by Finance Act 2020, the Concept of Perpetuity has been done away with i.e. “All the existing charitable trust or institutions registered under section 12A, section 12AA and 80G of the Income Tax Act”, will have to apply afresh for registration under the new provision of section 12AB of Income Tax Act on or before1st January 2022 till 31st March 2022.

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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken based on the above article.

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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)

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