Circular No. 11 of 2022, dated June 03, 2022, the Central Board of Direct Taxes (CBDT) clarified the requirements for Form No. 10AC's cancellation of Trusts & Institutions' registration or approval. The CBDT Clarification on Form 10AC is discussed in this article.

What is Form 10AC?

According to the Indian Income-tax Act 1961, Form 10AC refers to an order for registration or provisional registration or approval or provisional approval by the Principal Commissioner or Commissioner of Income-tax approved by the Board. These religious trusts, institutions, or charitable institutions can apply for registration to exempt themselves from certain taxes in India.

It is issued when a trust, institution applies for:

• Registration under Section 12A (to claim tax exemption on income).
• Approval under Section 80G (to allow donors to claim tax benefits).
• Exemption under Section 10(23C) (for educational & medical institutions).

What is the Registration Process for Form 10AC?

Let’s look at how someone can register as per the Form 10AC:

Eligibility

Only religious trusts, charitable organisations, and institutions seeking approval or registration under section 10(23C),12AB, and 80G of the Indian Income-tax Act,1961, are eligible.

Application

Log in to the official income tax website and fill out Form 10A or 10AB as applicable. Along with the form, attach the required documents, such as registration certificate, trust deed, list of trustees, etc.

Processing

The Commissioner or the Principal Commissioner of Income Tax will check the application and supporting documents. In case they need any clarification, they may request additional documents.

Order for Approval or Registration

Once the Commissioner is satisfied with the documents, they will issue Form 10AC for approval or registration. The form will have all the details about approving or registering the charitable, religious trust or institution’s applicable conditions and validity period.

Validity of Form 10AC

• Provisional registration granted via Form 10AC is valid for 3 years.
• After 3 years, the entity must apply for permanent registration using Form 10AB.
• If Form 10AB is not filed, the registration will lapse, and tax benefits will not apply.

Amendment in Form 10AC

The Finance Act of 2022 amended the Income Tax Act, enabling the Principal Commissioner or Commissioner of Income Tax to investigate any potential specified violation by an approved or registered trust or entity. Following the examination, a decision must be made about granting or denying registration cancellation.

The circumstances under which trusts and institutions were awarded registration, approval, or preliminary registration or approval need to be updated in light of the revisions made by the Finance Act of 2022 to bring them into compliance.

Conditions for Granting Approval or Registration

Here are some conditions on which the Principal Commissioner grants the registration or the approval:

• Any proposal to change the applicant's goals, rules, or regulations must be consulted first with the Commissioner of Income Tax.
• Any trust deed/MOA changes must be given immediately to the Office of the Jurisdictional Commissioner of Income Tax.
• The accounts should be maintained and audited as per the IT Act 1961.
• The ROI should also be furnished within the set time.
• This certificate cannot be used to support a claim that no tax was deducted at the source from investments or other items connected to the Trust or Institution.

Importance of Form 10AC

Listed below are some reasons why the Form 10AC is essential:

Tax Exemption

Form 10AC is essential to claiming exemption under Sections 12 and 10(23C) of the Income Tax Act,1961.

Attracting Donors

Donors prefer contributing institutions or trusts registered to claim deductions under Section 80G. Thus, this registration also indirectly attracts more donors.

Compliance

Charitable and religious trusts must follow the Income Tax Act's provisions and reporting requirements. Form No. 10AC guarantees that the trust is acknowledged as qualified for tax exemptions as part of the compliance procedure.

Click here to download the pdf format of Form 10AC.

Related Articles:
1. Form 10 of the Income Tax Act