Registration of Charitable/religious trust under section 12AA (the registration of trust w.e.f 01st June 2020 will be governed by Section 12AB), Section 10(23C), Section 80G of the Income Tax Act, 1961.
Income Tax Advisory Service
Union Budget 2020 has proposed significant changes in Taxability and compliance procedures of Charitable/religious trust registered under section 12AA of the Income Tax Act, 1961. The amendment/Insertion of following sections in The Finance Bill, 2020 are required to be considered for the purpose of Taxability and compliance procedure of charitable/religious trust under Income Tax Act, 1961. The amendments will take effect from 1st June 2020.
- Amendment of Section 10(23C)
- Amendment of Section 12A
- Amendment of Section 12AA
- Insertion of new Section 12AB
Effects of Amendments under Section 10(23C), Section 12A, Section 12AA and Insertion of Section 12AB.
Time limit for applying for registration
In order to claim benefit of the exemption all the trust or institution or university or other educational institution or hospital or other medical institution registered under section 12AA (new Section 12AB) and eligible for deduction under section 10(23C) of the Income Tax Act, 1961 are required to apply to the Principal Commissioner or Commissioner, for grant of approval. The time limit for applying for the registration is as under: –
- Already registered under the Act: – Within 3 months from 01st June 2020. The Finance Bill has introduced period of limitation for the validity of registration. Therefore, the registration of any such trust, institution, hospital as referred above shall be valid for the period of 5 years.
- Application for new registration as per the new provisions of the Act: – At least one month prior to the commencement of the previous year relevant to the assessment year for which approval is sought.
- Expiry of registration (i.e expiry of 5 years validity): – Atleast Six months prior to the expiry of the registration.
- Provisional Registration of Trust, institute referred above: – at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;
Time limit specific for trust or institutions registration under section 12AB of the Income Tax Act 1961
The trust registered under Section 12AB of the Income Tax Act, 1961 shall apply to Principal Commissioner or Commissioner in case of modification of object of trust or institution which do not conform to the conditions of registrations, within period of 30 days from the date of modification.
Application for the Registration is to be made to the Principal Commissioner or Commissioner and the following procedure will be followed by the authorities for grant of approval: –
- Where the application is made by those who are already registered under the Act as per the old provisions, then the respective authorities shall pass an order in writing granting approval to it for a period of five years. In nutshell, the registration which had life time validity as per the old provision will now be valid for the period of 5 years. The Finance Bill has not prescribed detailed procedure, unlike fresh application, to be followed for granting approval in case of trust/institution already registered under the Act.
- Where the application is made for fresh registration as per the new provision of the Act or after the expiry of 5 years, following procedure will be followed for grant of approval
(a) call for such documents or information from it or make such inquiries as the Principal Commissioner or Commissioner thinks necessary in order to satisfy himself about-
- the genuineness of activities; and
- the compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its objects; and
(b) after the Principal Commissioner or Commissioner is satisfied about the objects and the genuineness of its activities under item and compliance of the requirements as mentioned above, the he shall pass an order in writing granting approval to it for a period of five years. However, if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard
- Where the application is made for provisional registration then the authorities will pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution.
Assessment year from which the benefit of exemption will be available to the trust/institution after the registration is taken: –
- Where the application is made by trust/institution who are already registered as per the pervious provision of the Act, then the income of such trust/institution will get benefit of exemption from the assessment year from which approval was earlier granted to it;
- where the application for Provisional Registration then the income of such trust/institution shall get benefit of exemption from the first of the assessment years for which it was provisionally approved;
- in any other case, from the assessment year immediately following the financial year in which such application is made.
Time limit of passing the order by the Authorities for granting the approval
- In case of Trust/institution already registered as per old provisions of the act and apply for registration then the Order for Granting the approval under Section 10(23C) and Section 12AB shall be passed by the Principal Commissioner or Commissioner within period of 3 months from the end of the month in which the application was received.
- In case of Trust/institution applying for provisional registration then the Order for Granting the approval under Section 10(23C) and Section 12AB shall be passed by the Principal Commissioner or Commissioner within period of 1 months from the end of the month in which the application was received.
- In case of Trust/institution applying for case other than above (which may include fresh registration or applying for registration after the expiry of 5 years) then the Order for Granting the approval under Section 10(23C) and Section 12AB shall be passed by the Principal Commissioner or Commissioner within period of 6 months from the end of the month in which the application was received.
Cancellation of Registration under Section 12AB of the Income Tax Act, 1961
The Principal Commissioner and Commissioner can cancel the registration under Section 12AB of the Income Tax Act, 1961, where the registration of a trust or an institution has been granted and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution
- are not genuine
- are not being carried out in accordance with the objects of the trust or institution,
- the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution
- the trust or institution has not complied with the requirement of any other law, as referred to under the provisions of the Act and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.