Recent amendments under section 12A of Income Tax Act, 1961.
- Introduction : Recently government has made major changes relating to Income tax provisions, specifically applicable to charitable trust registered. Union budget, 2020.Under the new tax regime, she proposed to amend Section 10(23C), Section 11, Section12A, Section12AA, Section 80G and proposed to insert a new Section 12AB.
- For understanding charitable trust has been bifurcated in four categories
- Charitable / religious trusts/ institutions etc. registered under existing laws. (‘A Category’).
- Charitable / religious trusts/ institutions etc. whose registration expired under the new provisions in 5 years. (‘B Category’).
- Charitable / religious trusts institutions etc. having provisional registration under new provisions. (‘C Category’).
- Charitable / religious trusts/ institutions etc. acquiring new registration (‘D Category’).
Requirement | A Category | B Category | C Category | D Category |
Application to be made for registration | Charitable trusts and exempt institution which are already registered under section 12A or section 12AA of Income Tax Act, 1961 will now be required to reapply online for registration the provision will come into implementation from 1stOctober,2020. | Atleast Six months prior to the expiry of the registration. i.e. registration provided will be valid for the period of five years | Within Six Months from the commencement of activities or six months prior to the expiry of provisional registration, whichever is earlier. | Atleast one month prior to the commencement of the previous year relevant to the assessment year for which approval is sought. |
Time period in which order shall be passed | Within three months, to be calculated from the end of the month in which the application was received. | Within six months to be calculated from the end of the month in which the application was received. | Within six months, respectively, calculated from the end of the month in which the application was received. | Within one months to be calculated from the end of the month in which the application was received. |
Application to be made for 80G | Within three months from the Commencement of the new provisions i.e. 1stOctober,2020. | Atleast Six months prior to the expiry of the registration. | Within Six Months from the commencement of activities or six months prior to the expiry of provisional registration, whichever is earlier. | Atleast one month prior to the commencement of the previous year relevant to the assessment year for which approval is sought. |
- Important points:
- It is provided in section 12AB that where the trust or institution is already registered under section 12A or section 12AA and on an application is made under section 12A(1)(ac)(i), registration shall be granted by the Principal Commissioner or the Commissioner by passing an order within a period of three months from the end of the month in which the application was received and such registration shall be valid for a period of 5 years.
- This amendment will require every trust or institution which are already registered to apply again and in case such application is not made, then, by implication, the registration shall stand cancelled on the expiry of three months i.e. 31st December, 2020; with the consequence that such trust or institution shall not be eligible for claiming exemption under section 11 of the Act.
- Any registration granted u/s 12AB(1)(a) or u/s 12AB(1)(b) can be cancelled subsequently if the Principal Commissioner or the Commissioner is satisfied that –
(a) the activities of the trust or institution are not genuine; or
(b) are not carried out as per the objects of the trust or institution; or
(c) the trust or institution has not complied with the requirement of any other law for the time being in force as is material for the purpose of achieving its objects and the order or direction or decree, by whatever name called, holding that such non-compliance has occurred has attained finality or has not been disputed, after giving a reasonable opportunity of being heard to the trust or the institution.
- Documents Required
(a) Where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
(b) Where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
(c) Self-certified copy of registration with Registrar of Companies in case trust is registered under section 8 of Companies Act, 2013.
(d) Where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (Maximum up to 3 years immediately preceding the year in which the said application is made) for which such accounts have been made up.
(e) Self-certified copy of existing order granting registration under section 12A or section 12AA, as the case may be; and
(f) Self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA,as the case may be, if any.
5.Additional Compliance to trust registered under section 80G:
- Similarly, charitable trusts and exempt institutions which already have section 80G certificate will now be required to reapply online for registration or approval by December 31, 2020. The registration shall remain valid for 5 years.
- Further, the charitable/religious trusts institution etc. shall file a statement of receipts of donation to the Income tax authority.
- Also, the charitable/religious trusts institution etc. will be required to furnish the donor, a certificate specifying the of donation, containing such particulars and on the basis of which donor will be provided with deduction under 80G directly in the return of income on the basis of the prescribed statements.
6.Question may arise:
Question : Whether any form has been prescribed for the said registration?
Answer : No. currently no form has been prescribed for the said registration.
Question : Whether it is compulsory to comply with the provisions of 12AB?
Answer : According to amendment it will be mandatory for every trust or institution which are already registered to apply again and in case such application is not made, then, by implication, the registration shall stand cancelled on the expiry of three months i.e. 31st December, 2020; with the consequence that such trust or institution shall not be eligible for claiming exemption under section 11 of the Act.
Question : Whether any trust registered under 80G is required to apply for re-registration?
Answer : Yes, charitable trusts and exempt institutions which already have section 80G certificate will now be required to reapply online for registration or approval by December 31, 2020. The registration shall remain valid for 5 years.
Question : Whether such there is any additional requirement prescribed under section 80G?
Answer : Further, the charitable/religious trusts institution etc. shall file a statement of receipts of donation to the Income tax authority. Further they we also be required to furnish certificate to donor in respect of his donation.
Question : Which Online Form needs to be filed for Annual Statement of Donation?
Answer : The Form needs to be filed Online by the person authorized by Trust or Entity within such time as maybe prescribed by the Income Tax Department. The Income Tax Department has not yet come out with guidelines or forms for the same.
Question : Can Trust Entity Revised the Annual Statement of Donation?
Answer : If Annual Statement of Donation contains any mistakes or there is a need for any addition or updation of information in the same then a correction
statement can be filed like we file revised Income Tax and TDS Returns.
Question : What if Trust or Entity Fail to File Annual Statement of Donation?
Answer : Incase there is a delay in filing according to section 234G late fee of Rs. 200/- per day shall be applicable. Further a penalty of Rs. 10,000/- which may go up to Rs. 10,00,000/- can be levied as per section 271K.