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. Here are the few Frequently asked Question for the Provision of Charitable Trust including Procedure of Section 12AB of Income Tax Act.
- What are the changes made under Income Tax for Trust?
Trust which are already registered and availing benefit under Section 12A or 12AA
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 1st October, 2020.
Trust which are not registered under Income Tax but want to apply for fresh registration
Such Trust shall apply for registration at least one month prior to the commencement of the previous year relevant to the assessment year for which approval is sought. Say for Example if a trust wants to sought registration for the Previous year 2021-22 (AY 2022-23) then such trust shall make application at least one month prior to the comment of the previous year i.e. before 01st March 2021
- What is the time limit for trust already registered under Section 12A or 12AA to applying for registration under Section 12AB?
Trust which are already registered and availing benefit under Section 12A or 12AA shall apply for registration before 31st December 2020.
- Under which Section the trust shall apply for registration and what is the validity period if registration is granted?
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.
- What are the consequences if trust which are already registered does not apply for fresh registration within the prescribed time limit?
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.
- How the trust will fall into the category of “Trust having Provisional Registration”?
Provisional registration will be granted to trust till the time final approved registration is received by the trust from Principal Commissioner or Commissioner. Say for example a trust has applied for fresh registration one month prior to Previous year for which benefit under Income Tax for charitable trust is sought for. As per the prescribed time limit the trust shall receive approval or rejection order within one month from the end of the month in which application was made. Now if the trust didn’t receive any kind of order, in that scenario Trust shall again make the application for registration as they would be under the category of “Trust having Provisional registration”.
- What is the time limit for trust to apply for registration in case the trust is under Provisional Registration?
Such trust shall make application for registration within Six Months from the commencement of activities or six months prior to the expiry of provisional registration, whichever is earlier.
- To whom the trust shall apply for registration?
The trust shall apply for registration to Jurisdictional Commissioner or Principal Commissioner. Such application shall be made online and the procedure will be notified by the Income Tax Department.
- What is the time limit within which trust shall be granted registration for the application made by the trust?
For existing trust applying for registration, the order shall be passed by Principal Commissioner or commissioner within three months from the end of the month in which application for registration was received was received by relevant authority.
For new trust applying for fresh registration, the order shall be passed by Principal Commissioner or commissioner within one month from the end of the month in which application for registration was received was received by relevant authority.
For other registration which includes (trust under provisional registration or trust whose registration period is expired) the time limit is six months from the end of the month which application for registration was received by relevant authority.
- What are the probable reasons due to which registration may not be granted by Commissioner or Principal Commissioner or the registration is cancelled subsequently?
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.
- What are the documents required to be submitted for registration of trust under Section 12AB?
Following documents are required for registration of trust under Section 12AB
(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