New Registration process for charitable or religious trusts under section 12A/12AB

Finance Act, 2020 had inserted a new clause (ac) in section 12A(1) of the Income Tax Act, 1961 which could not be made effective in Financial Year 2020-21 owing to Covid-19 situations. This clause has been now made effective from 01-04-2021. Further, a new Notification No. 19/2021 dated 26-03-2021 has been issued to give effect to procedure for application of the clause (ac) of section 12A(1) of the Income Tax Act. In this article, we would discuss the newly inserted clause (ac) along with Notification No. 19/2021 to understand what the existing and new trusts will have to do to obtain registration under section 12A in future.
Clause (ac) of sub-section (1) of section 12A of the Income Tax Act states that notwithstanding anything contained in clause (a) to (ab), the person in receipt of the income who intends to claim benefit of section 11 & 12 is to make application in prescribed form to PCIT or CIT for registration of the trust. The forms as prescribed for this purpose are Form No. 10A & 10AB. In simple words, every trust who intends to claim benefit u/s 11 & 12 shall make application in Form No. 10A or 10AB, as the case may be, to PCIT or CIT for registration of trust. The procedure for registration was earlier specified in section 12AA. However, section 12AA has been withdrawn now and section 12AB has now been inserted for making effective the registration procedure of trusts. Thus, all trusts which were earlier registered u/s 12A or 12AA shall now have to obtain fresh registration u/s 12AB.

What is the time limit for registration under section 12A(1)(ac) and section 12(AB)

What is the validity period of registration under section 12AB

In case of trusts or institutions which are having existing registration u/s 12AA shall apply for registration u/s 12AB online by 30-06-2021 in Form 10A. The validity of registration u/s 12AB shall be for 5 years. However, provisional registration shall be granted for a period of 3 years.

For this purpose, CBDT has issued Notification No. 19/2021 dated 26th March 2021 which makes it mandatory for all the trusts/ societies/institutions registered under section 12A and 80G to obtain fresh registration.

What is the procedure of registration under section 12AB

Step-1: Log in to Income Tax India E-Filing Portal using to login credentials and password

Step-2: Navigate to “Income Tax Forms” under E-File tab and select Form 10A/ 10AB, as the case may be

Step-3: Select the option “Prepare and Submit online” to fill requisite details in the form

Step-4: Attach the requisite document along with Form 10A/10AB

Step-5: Submit the form using digital signatures or EVC

Step-6: On receipt of application in Form No. 10A or 10AB, as the case may be, the PCIT or CIT shall process the application within the prescribed time limit: -

• In case the applicant is already registered u/s 12AA or in case of provisional registration, where Form No. 10A has been submitted by the applicant: - Order granting registration shall be granted in writing in Form No. 10AC. A 16-digit alphanumeric Unique Registration Number (URN) shall be allotted on successful registration.
• In cases where Form No. 10AB has been filed, order granting registration or rejection or cancellation shall be in Form No. 10AD.

Is digital signature compulsory for filing Form No. 10A/10AB

• Form No. 10A or 10AB, as the case may be is required to be digitally signed, only where the Income Tax Return of the Trust/institution is required to be furnished with digital signature.
• In other cases, the forms may be submitted with Electronic Verification Code (EVC)

Who shall verify the Form 10A/10AB

Form 10A/10AB shall be verified by the person who is authorized to verify the return of income of trust or institution u/s 140 of the Income Tax Act.

What are the documents required along with Form No. 10A or 10AB

Following is the list of documents needed to be submitted along with Form No. 10A/10AB:-

• Where the trust/ institution is created, or established under an instrument, self -certified copy of such instrument creating or establishing the trust/ institution
• Where the trust/institution is created or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the trust/institution
• Self-certified copy of registration with Registrar of Companies or Registrar of Firms or societies or Registrar of Public Trusts, as the case may be
• Self-certified copy of registration under FCRA, if the applicant is registered under such Act
• Self-certified copy of existing order of registration under section 12A or 12AA or 12AB, as the case may be
• Self-certified copy of order of rejection of application for grant of registration under section 12A or 12AA or 12AB, as the case may be if any;
• In case of existing entities, copies of annual accounts for the period not exceeding 3 years immediately preceding the year in which the application is made
• Where the income of the entity includes profits and gains of business as per the provisions of sub-section (4A) of section 11, copies of annual accounts and audit report u/s 44AB for 3 years immediately preceding the year in which the said application is made
• Self-certified copy of the documents evidencing adoption or modification of the objects
• Notes on the activities of the applicant trust or institution
• If registered on DARPAN Portal, then details of such registration

In addition to the above following documents are also needed:

• If PAN/Aadhar available- PAN and Aadhar of all authors/ settlors/ trustees/ Members of Governing Council/ Members of societies/ Shareholders holding not less than 5% shares
• If PAN/ Aadhar not available: - Voter ID or Passport or Driving License of the above persons

Can approval granted under section 12AB be cancelled

• If, at any point of time, it is noticed that Form No. 10A has not been duly filled in or by providing false or inaccurate information or documents, the PCIT or CIT may cancel the registration in Form No. 10AC
• However, an opportunity of being heard will be allowed before cancellation
• On cancellation, it shall be deemed that URN had never been granted or issued

Similar amendment in registration/ renewal procedure has also been made in section 80G. Thus, the existing trusts/ institutions will now have to apply for fresh registration under section 80G in the same manner as applicable in section 12AB. Such application shall be made through Form No. 10A or 10AB, as the case may be.
An important change which has been made is that trusts or institutions who are registered u/s 80G shall now furnish a statement containing details of donations received during the year in Form No. 10BD in the prescribed manner. Further, the trust or institution shall issue a certificate of donation to the donor in Form No. 10BE.

Read More: - Notification No. 19/2021 dated 26.03.2021

Download here:- Form No. 10A of Income Tax Rules