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 procedure of Religious and Charitable Trusts/institutions, etc. 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

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 trust or 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

In order 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 the Income Tax Department has 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 section 80G, 12A, and other related section 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

The new registration procedure prescribed under section 12AB was supposed to be made applicable from 01.06.2020 and was supposed to be completed by 31.08.2020 which was firstly deferred and extended to 01.10.2020 and end by 31.12.2020.

But considering the current pandemic situation, it has been extended to 01.04.2021, and hence now all existing trusts have to re-register themselves under section 12AB from 01.04.2021 and before the end of three months from the 1st Day of April 2021.

Read Update over last date of section 12AB registration.

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

Yes, It is mandatory for a trust to get the registration under section 12AB of Income Tax Act, 1961, so as 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 satisfied that the applicants have not complied with the objects mentioned, shall cancel the application by providing a reasonable opportunity of being heard.

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

Form for application under section 12AB of Income Tax Act

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

Validity period of Registration

The registration once granted shall be valid for 5 Years.

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.

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

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

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

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

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

4. Copy of PAN Card of Trust.

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

Also Read- Documents Required for ITR Filing- Income Tax Return Filing

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

7. List of Donors with their PAN and Aadhar.

8. List of Governing body or members of the trust/Institution with following details-

  • Name
  • Address
  • AAdhar No.
  • PAN No.
  • Mobile No.
  • Email Id

9. Trust Deed for verification of the original registration certificate and MOA.

10. 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 1st April 2021, 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 30th June 2021.

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?

    Following documents are required for filing the application in form 10A-
    1. Registration Certificate and MOA/Trust deed (2 self-attested copies by the Managing Trustee)
    2. NOC copy from the Landlord in case of the rented property.
    3. Utility Bill Copy e.g. Electricity Bill, Water Bill, House Tax, etc. for the owned property.
    4. Copy of PAN Card of Trust.
    5. Evidence of welfare activity carried out and progress report of the same for the last 2 years or since inception.
    6. Books of Accounts, Balance Sheet, ITR (If Any) of the last 3 years or since inception.
    7. List of Donors with their PAN and Aadhar.
    8. List of Governing body or members of the trust/Institution with the following details-
    Name
    Address
    AAdhar No.
    PAN No.
    Mobile No.
    Email Id
    9. Trust Deed for verification of the original registration certificate and MOA.
    10. Any other documents required for 12AB registration or any information as asked by the department may be required at the time of application.

  3. What is 12AB Registration?

    As a result of registration u/s 12AB, old registration under section 80G, 12A, and other related section 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.

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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 on the basis of the above article.

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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)

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