Get 12A Certificate and Tax Exemption
Seamlessly get certificate under section 12A of Income Tax Act, 1961 and get exemption from paying tax.
INTRODUCTION
Under Section 12A of the Income Tax Act, 1961, non-profit organizations such as charitable trusts, welfare societies, and religious institutions are eligible for tax exemptions.
This tax relief was established to recognize that non-profit entities focus on social welfare rather than profit generation. Due to their altruistic contributions to society, these organizations are exempt from taxes covered under Sections 11 and 12.
However, to benefit from these tax exemptions, organizations must register according to the provisions of Section 12A. If a non-profit fails to complete this registration, all future financial transactions and receipts will be considered taxable.
Therefore, it is crucial for non-profit entities to thoroughly understand the details of Section 12A of the Income Tax Act, including the eligibility criteria and required documentation.
Eligibility and Applicability
To qualify for Section 12A registration, an organization must fulfill the following criteria:
- It must align with the definition of charitable purpose as defined in the Income Tax Act, which includes relief for the poor, education, medical assistance, environmental preservation, and other public utility activities.
- The organization should not operate with a profit motive; registration is granted only when profit-making is not the primary aim.
- If the organization engages in commercial activities, it can only register if the receipts from such activities are less than 20% of its total income.
Section 12A registration is not applicable to private or family trusts; activities should genuinely serve the public interest.
Relevance of Form 10A
Organizations and trusts eligible for registration under Section 12A of the Income Tax Act must complete Form 10A online.Charitable or religious trusts seeking to claim exemptions under Sections 11 and 12 must register under the Income Tax Act of India by submitting Form 10A.
The applicants need to provide a digital signature to submit Form 10A. Alternatively, they can file the form online using an electronic verification code.
This form can be filed by the applicant through the Income Tax Department e-filing portal and filling in the details as specified in order to receive a Section-12A certificate.
Required Documents
In addition to Form 10A, applicants must provide several essential documents. Here’s a complete list of self-certified documents that trusts, societies, and firms need to submit:
- A document establishing the trust or organization.
- Proof of the trust or institution’s creation.
- Registration with the Registrar of Companies (RoC), Registrar of Public Trusts, or Registrar of Firms and Societies.
- Documentation showing the adoption or amendment of objectives.
- Annual financial statements for the trust or institution.
- Any existing order granting registration under Sections 12A or 12AA.
- A summary of the activities carried out by the trust or institution.
- A copy of any order that has previously rejected an application for registration under Sections 12A or 12AA.
Once non-profit entities understand the eligibility criteria and necessary documents for Section 12A registration, they should proceed to learn about the registration process.
Steps to Obtain 12A Registration
Follow these steps to obtain 12A registration:
- Apply online in the required format.
- The Commissioner may request additional documentation from applicants.
- If the Commissioner finds the provided information satisfactory, they will issue a written order confirming the registration of the organization or trust.
If the Commissioner is not satisfied with the submitted information, they will notify the applicant in writing of the decision to deny registration.
Applications for registration under Section 12AA should be submitted to the jurisdictional Commissioner of the Income Tax Department. The entire registration process typically takes 1 to 3 months to complete.
Additionally, Section 12AA(2) states that both approval and rejection orders from the Commissioner must be communicated within 6 months from the end of the month in which the application was received.
It is also crucial to note that once a trust is registered, the registration is valid for a lifetime. This means that as long as the trust remains active, there is no need for renewal, though the Commissioner may cancel the registration under exceptional circumstances.
What is included in this
FAQs
No, the department first issues a provisional certificate and the applicant needs to apply again for the permanent certificate by following the same procedure and submitting relevant documents.
- Any income derived from property held under trust, wholly or in part for charitable or religious purposes, shall not be applied, other than for the objects of the trust or institution.
- The trust or institution shall not have income from profits and gains of business which is not incidental to the attainment of its objectives.
- Separate books of account shall be maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives.
- The trust or institution shall not apply any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public.
- The trust or institution established for charitable purpose created or established after the commencement of this Act, shall not apply any part of its income for the benefit of any particular religious community or caste.
- No non-genuine activity shall be carried out by the trust or institution.
- No such activity shall be carried on by the trust or institution which is not in accordance with all or any of the conditions subject to which it was registered.
- The trust or institution shall comply with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1) of section 12AB.
- The form for registration in Form No 10A has been duly filled in by providing all the information or documents and no false or incorrect information or documents have been provided.
- The trust or institution shall apply for registration within 6 months of commencement of the activities or at least 6 months prior to the expiry of period ofprovisional registration, whichever is earlier.
- Where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, the trust or institution shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution, within a period of thirty days from the date of the said adoption or modification.
