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Section 12AB registration: A guide for charitable and religious trusts

What is Section 12AB?

Section 12AB of the Income Tax Act, 1961 was introduced as part of the Finance Act 2020 and replaced the earlier Section 12AA for registration of charitable and religious organizations in India.

This provision regulates the registration process for trusts, societies, and non-profit organizations applying for tax exemptions.

The registration confirms that the organization operates exclusively for charitable or religious purposes. Section 12AB registration is a mandatory requirement for charitable and religious entities to claim income tax exemptions under Sections 11 and 12 of the Income Tax Act.

Who is eligible for Section 12AB registration?

Eligibility for Section 12AB registration is specifically defined for organizations with charitable goal. Entities that qualify include:

1. Charitable trusts established through a trust deed with defined charitable objectives.
2. Religious trusts focused on advancement and maintenance of religious activities and institutions.
3. Registered societies registered under the Societies Registration Act
4. Section 8 companies registered under Section 8 of the Companies Act, 2013
5. Educational institutions primarily engaged in educational activities without profit motives.
6. Medical institutions providers operating on a not-for-profit basis.

What are the documents required for Section 12AB registration?

To apply for Section 12AB registration, the following documents are needed:

• PAN card of the trust or institution
• Trust deed, Memorandum of Association (“MOA”), or Constitution document
• Registration certificate issued by relevant authorities (if applicable)
• Audited financial statements for the last three years (if applicable)
• Details of trustees or key members (Name, PAN, and Aadhaar)
• Activity report of the last three years (if applicable)
• Self-certified copies of previous Section 12AA or 12AB registration (if applicable)

What are the benefits of Section 12AB registration?

1. Income tax exemption: Registered organizations are exempt from income tax under Section 11 and 12 of the Income-tax Act.
2. 80G certification eligibility: Only Section 12AB registered entities can apply for 80G certification, allowing donors to claim tax deductions.
3. Credibility and transparency: Registration enhances the credibility of the organization and makes it eligible for government grants, foreign donations (FCRA), and CSR funding.
4. Legally recognized status: Ensures recognition under Indian tax laws, avoiding scrutiny and compliance issues.
5. Property tax benefits: Many states offer property tax exemptions to Section 12AB registered organizations.
6. GST benefits: Specific exemptions under GST for services provided by registered charitable entities.
7. Customs duty exemptions: Possible exemptions on imported goods meant for charitable purposes.

Is registration for life long or renewable?

Section 12AB registration is not lifelong and follows a structured renewal schedule based on when and how the registration was obtained:

1. New registrations: Initial registration is valid for 5 years.
2. Provisional registrations: Organizations less than 3 years old receive provisional registration valid for 3 years.
3. Renewal process: Application for renewal must be submitted at least 6 months before the expiration date using Form 10AB.
4. Renewal validity: Successful renewals typically grant registration for another 5 years.

There is no monetary penalty for failing to renew Section 12AB on time. However, any delay or failure in filing the renewal application may lead to the loss of tax-exempt status, resulting in significant tax liability under Section 115TD, which imposes tax on accreted income.

You can also refer to the detailed section on it on the website of Income Tax Of India

80G registration: Tax benefits for donors and NGOs

What is Section 80G registration in India?

Section 80G registration is a provision under the Income Tax Act, 1961, that allows non-profit organizations to offer tax deduction benefits to their donors. When an organization obtains 80G certification, individuals and companies that donate to it can claim tax deductions on their donations.

This certification acts as governmental recognition of the organization's charitable status and financial credibility. Donations made to eligible NGOs, trusts, and religious institutions qualify for deductions up to 100% or 50%, depending on the organization’s category.

Who is eligible to be registered under Section 80G?

Eligibility for Section 80G registration is restricted to organizations that meet the followings criteria:

1. Prior registration requirement: The organization must first be registered under Section 12AB of the Income Tax Act, 1961.

2. Eligible organizational structures: 

• Public Charitable Trusts
• Registered Societies with charitable objectives
• Section 8 Companies
• Government-funded educational institutions
• Religious trusts of public character

3. Nature of activities: The organization must be engaged in: 

• Relief of the poor
• Education
• Medical relief
• Preservation of monuments or places of historic importance
• Advancement of any other object of general public utility

4. Financial requirements: 

• Maintain proper books of accounts
• Spend at least 85% of income on charitable activities each year
• No income should benefit any specific individual

5. Operational requirements: 

• Must have operated for at least 3 years (with some exceptions)
• Activities should be conducted in India
• Must not be engaged in profit-making activities

Organizations that primarily promote a particular religious doctrine or primarily benefit a specific religious community may face additional scrutiny or limitations.

What are the documents required for Section 80G registration?

• PAN card of the trust/organization
• Registration certificate under Societies Act, Trust Act, or Companies Act
• Trust deed, MOA, or AOA
• Income tax returns and audited financials for the past three years (if applicable)
• Section 12AB registration certificate (mandatory)
• Details of activities, projects, and beneficiaries
• Bank account details and IT returns of trustees (if required)

What are the benefits of Section 80G registration?

• Attracts more donations: Donors prefer 80G-registered organizations as their contributions qualify for tax benefits.
• Tax deduction for donors: Individuals and corporations donating to 80G-approved NGOs can claim tax deductions of 50% or 100% under Section 80G(2).
• Corporate social responsibility (“CSR”) funds: Many corporate entities fund 80G-certified organizations as part of their CSR obligations.
• Enhanced credibility: Government-recognized status increases trustworthiness and helps secure grants.

Is 80G registration for life long or renewable?

Section 80G registration is not permanent and follows a specific validity period:

1. Validity period: Following amendments in the Finance Act 2020, new 80G registrations are valid for 5 years.
2. Renewal process: Organizations must apply for renewal at least 6 months before the expiration date through Form 10BD on the Income Tax portal.
3. Assessment during renewal: The Income Tax Department conducts a fresh assessment of the organization's activities, financial compliance, and adherence to charitable objectives.
4. Documentation for renewal: 
   • Updated financial statements
   • Activity reports for the past 5 years
   • Proof of compliance with income application requirements
   • Updated governance documents
5. Provisional registration: New organizations may receive provisional registration with shorter validity periods.

You may also want to know: ITR Filing for Businesses.