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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.
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 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.
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 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.
Two separate forms have been prescribed for a trust, institution, or NGO as per the new rules:
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.
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.
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
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:
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.
Yes, every trust, institution, or NGO is required to file a new application for registration.
Yes, Form No. 10AB has been activated on the income tax portal.
No, they are the same set of documents, which includes the Registration Certificate/ Trust Deed of the organisation, FCRA certificate, 10 (23C) approval/ rejection order, and annual account of the last three years (along with 44AB audit report), just to list a few.
The application for new registration has to be filed one month before the commencement of the previous year in which the charitable activities have to be started.