Overview of 12AB Registration

The Finance Act, 2020 has made comprehensive alterations regarding the provisions related to Trusts and NGOs holding exemption u/s 11 or u/s 12 of the Income Tax Act, 1961. The amendments in the Finance Act are regarding with the following agendas, which are as follows:-

• Registration procedure of all the existing registered trusts under section 12AB,
• Renewal of registration,
• Approval for deduction u/s 80G and,
• Preparing the statement of donations received to the Income Tax Authorities are some of the noted ones.

As per the amendment, to continue availing exemption under section 10 or 11, all the existing charitable and religious institutions registered under the following Sections 12A, Section 12AA, Section 10(23C), Section 80G are mandatorily required to change to section 12AB for fresh registration.

Note- The new provisions will come into effect from 1st April 2021, 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 to change it to section 12AB for fresh registration with the time duration of 3 months which is 30th June 2021.

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

What are the Benefits of 12AB Registration?

The benefits of 12AB Registration are mentioned below:-

• Help in Providing Electronic Database

  Section 12AB was introduced to provide an electronic database.

• To Remove Odds from Old Trusts

  The trust registered under the old section however have misplaced their registration number, nor the Income Tax Department have any records of the same. By introducing Section 12AB, the work will be done electronically.

• Avoiding Difficulty via Various Facilities

  Due to non-commencement of any activities, newly formed Trusts are facing difficulties. Section 12AB has removed that the difficulties of the New trust by providing various facilities.

Who are Eligible to take Registration under 12AB of the Income Tax Act?

To continue taking exemption under section 10 or 11, all the new and existing charitable & religious institutions (including NGOs) which are registered under the following section are compulsorily required to move to section 12AB for fresh registration, which are as follows:-

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

Also, various institutional trusts registered under section 10(23C) or section 12AA are required to renew their registration under section 12AB. Consequently, Section 12AA which stipulates the registration process for the Trusts or Institutions will cease to exist and a new section 12AB will come into force with effect from whichever is earlier:-

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

What Documents are Required for 12AB Registration?

Various documents are required for registration under 12AB. The list of documents required is mentioned below:-

• In case of a company- Certificate of Incorporation and MOA.
• Copy of PAN Card of Trust.
• In case of a trust-Trust deed (2 self-attested copies by the Managing Trustee)
• In the case of rented property, NOC from the Landlord is required.
• To address Proof-Utility Bill Copy i.e. Electricity Bill, Water Bill, House Tax, etc. for the owned property.
• Proof of welfare activity carried out by the trusts. Also, the progress report of the same for the last 2 years or since inception.
• Books of Accounts, Balance Sheet, Income Tax return of the last 3 years or since inception (If any).
• Particulars of Donors with their Id and Address Proof.
• Particulars of Governing body or members of the trust/Institution.

What is the Registration Procedure for 12AB Registration?

The procedure for registration under Section 12AB of the Income Tax act 1961 is not defined as such. However, these steps are required to be followed:-

• The application for 12AB can be made by filing Form 10A online on the income tax site incometaxindiaefiling.gov.in.
• Form Section 12AB is available on the income tax website under Income Tax Forms Section under the e-file menu which is visible after login on the website.
• The application shall be made online to the appropriate authority by Filing Form 10A along with the requisite documents to the Commissioner or Principal Commissioner.
• After reviewing the application Commissioner or Principal Commissioner shall pass an order granting approval or rejection within 3 months from the date of commencement of new provisions.
• Further, in the case where Commissioner or Principal Commissioner is not satisfied that the charitable trusts or institution, etc. have complied with the objects mentioned or with any other law, shall cancel the registration of charitable institution etc. However, the authority will provide a reasonable opportunity of being heard before canceling the registration.

What is the Validity of Registration granted under Section 12AB?

The registration granted under section 12AB remains 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.

What is the Division of Registration under 12AB?

As per the current way of registration effect from 1st April 2021, the registration can be divided into the below-mentioned categories:-

• Existing trusts registered under 12A/12AA needs to be re- registered under Section 12AB.
• Process of Conversion of Provisional Registration into Normal Registration also Includes Provisional Registration.
• Renewal of Registration granted under Section 12AB.