As we deep-dive into the relevance of Form No. 10AB of the Income-tax Act, 1961 for various charitable trusts and institutions, here’s a quick primer on trusts and  non-profit organisations (NPOs)—also referred to as non-government organisations or NGOs.

In India, there are generally two types of trusts: private and public trusts—which include religious and charitable trusts. Then there are statutory trusts formed by the government and quasi-government bodies (supported by the government but managed privately).

We have NPOs/ NGOs, which may be registered as charitable trusts, societies, or Section 8 companies (formed to promote  trade, art, science, charity, religion, environment protection, social welfare, sports, and research, among others).

The various funds, trusts, universities, educational institutions, hospitals, and NPOs/ NGOs get exemption from tax, subject to certain conditions, under Sections 10(23C), 12A, 12AA, 35, and 80G of the Income-tax Act, 1961. 

Earlier

A trust, institution, or NPO/ NGO, once registered, held a lifetime validity unless the Income Tax Department cancels it. However, The Finance Act, 2020, introduced certain amendments to the overall registration system. While being completely electronic,  a unique registration number (URN) is allotted to an applicant. 

The Change

“The Income-tax Department introduced changes to the rules and application format for funds, charitable trusts, universities, institutions—including educational and medical institutions—and NPOs/ NGOs from April 1, 2021.

The Introduction of Section 12AB 

Charitable trusts, institutions, NPOs/ NGOs that are presently exempted under the Sections 10 (23C), 12A, 12AA, 35 or 80G of the Income-tax Act, 1961 are required to reapply for the same and obtain a new registration under a new Section 12AB. 

In addition, Section 12AB extends benefits in terms of tax exemption, seeking grants from government or foreign agencies, as well as in application of Foreign Contribution (Regulation) Act (FCRA) registration to obtain international funding.

The New Concept

The Finance Act, 2020 introduced the concept of permanent and provisional registrations.

Provisional registration: A provisional registration will be given to an existing trust or institution applying for registration under Section 12AB. Form No. 10A needs to be duly filed while applying for provisional registration for the first time.  

If any new trusts seeks fresh registration, the application for provisional registration under Section 12AB has to be filed one month before the commencement of the previous year in which the charitable activities have to be started.

The provisional registration will be granted for a period of three years.

Renewal of provisional registration or permanent registration: Trusts or institutions who have received the provisional registration must apply for a permanent registration by submitting Form No. 10AB, at least six months before the expiry of provisional registration or six months within the commencement of charitable activities, whichever is earlier. The registration will be granted for a period of five years. 

Trusts or institutions who have received the provisional registration must apply for a permanent registration by submitting Form No. 10AB, at least six months before the expiry of provisional registration or six months within the commencement of charitable activities, whichever is earlier. The registration will be granted for a period of five years. 

Re-registration: Re-registration is required at least six months before the end of five years.

The New Forms

Two separate forms have been prescribed for a trust, institution, or NGO as per the new rules:

• Form No. 10A: For provisional registration.
• Form No. 10AB: For conversion from provisional registration to permanent registration. 

Who Needs to File Form 10AB?

You need to file Form 10AB if your organization falls under any of the following categories:

• Seeking initial registration or approval: This applies to newly established trusts and institutions aiming to claim tax benefits under sections 10(23C), 12A, or 80G of the Income Tax Act.
• Renewal of existing registration or approval: Existing registered trusts and institutions need to renew their registration or approval every five years through Form 10AB.
• Conversion of provisional registration to regular registration: If your trust received provisional registration under the new scheme, you need to submit Form 10AB at least six months before the expiry or commencement of activities, whichever is earlier.
• Re-registration due to modification of objectives: If your trust's objectives deviate from the original registration conditions, you need to re-register using Form 10AB.
• Activation of inoperative registration: If your registration under sections 10(23C) or 10(46) becomes inactive, you can activate it through Form 10AB.

Format of Form No 10AB

103520000000036034.pdf (incometaxindia.gov.in)

Note: The new Form No. 10A is used only once in the lifetime of the trust, institution, or NGO for registration or approval for the first time. In the case of subsequent renewals, Form No. 10AB would be required.

Extension of Timeline

The last date to apply for registration or approval in Form No.10AB, for which the last date for filing is on or before September 29, 2022, has been extended to September 30, 2022.

Illustration

In the case of New Trusts applying for Fresh Registration

If any new trust seeks registration from the financial year 2022-23, then it should apply one month prior to the commencement of the financial year 2022-23. 

In this case, it should apply for provisional registration before March 1, 2022 by submitting Form No. 10A.

The said provisional registration will be valid for three years, that is up to March 31,  2025

Converting Provisional Registration to Final Registration 

If in the above example, the trust starts their charitable activities from  September 1, 2022, then the time frame to apply for the final registration is earlier of the following:

• At least six months before expiry of provisional registration, this is. up to November 30, 2024, or
• Within six months of the start of charitable activities, that is  up to February 28, 2023  

It is, therefore, the trust should apply before February 28, 2023 for final registration through Form No. 10AB.

Such final registration will be valid for five years. If the trust wants to apply for renewal of registration, it can apply at least six months before the expiry of five years of registration.

E-filing of the Form No 10AB

• Visit https://www.incometax.gov.in/iec/foportal and log in with your details
• Click on Income Tax Forms followed by File Income Tax Forms under the e-File tab
• Select the form name as Form No. 10AB and click on the relevant Assessment Year from the drop-down menu
• Key in the details as required in Form No. 10AB and along with it attach the necessary   documents
• Now, click on submit using a digital signature or electronic verification code (EVC) as mandated on return filing