Under Section 12A of the Income Tax Act, 1961, non-profit organisations like charitable trusts, welfare societies, NGOs, religious institutions, etc. are entitled to tax exemptions.
This tax relief was introduced, keeping in consideration that non-profit entities work for social welfare and not for generating profit. Owing to their selfless contribution towards the society, they are exempted from taxes that come under the purview of Section 11 and Section 12.
Nevertheless, to claim such tax benefits individuals need to get registered as per the norms of Section 12A of ITA. In case a non-profit organisation fails to register under 12A, all their future financial transactions and receipts will be deemed taxable.
All these make it essential for non-profit entities to become familiar with the components of Section 12A Income Tax Act in detail. They should also find out more about the eligibility requirements and documents, among others.
The Income Tax Department of India sets eligibility criteria for registering under Section 12A. Ideally, these following entities who are engaged with social welfare are considered eligible to register under 12A –
However, private or family-owned trusts and charities cannot qualify for this Act. Organisations and Trusts that are eligible to register under Section 12A Income Tax Act are required to fill a form under 10A online.
One must note that applicants are required to provide a digital signature to file form 10A. Alternatively, applicants can also file this form online through an electronic verification code.
By following these steps, one can easily file Form 10A online –
Step 1 – Log onto the Income Tax Department’s e-filing platform.
Step 2 – Navigate to the page’s left side.
Step 3 – Click on the ‘Submit Returns/Forms’ option.
Step 4 – Use credentials like user ID and password to log in to the account.
Step 5 – Click on ‘e-file’ bar and select the ‘Income Tax Forms’ from the drop-down menu.
Step 6 – From the field ‘Form Name’ select Form 10A.
Step 7 – Select relevant ‘Assessment Year’ and ‘Submission Year’.
Step 8 – Provide the required details and verify it.
Step 9 – Click on the ‘Submit’ option.
One must note that just filing the Form 10A does not guarantee registration under Section 12A Income Tax Act as the application has to be verified by the commissioner. Applicants are required to submit necessary documents to complete the verification process.
Besides 12A Form, applicants need to submit a set of other vital documents. Here is a list of self-certified documents required to be shared by the societies, trusts and firms –
Once non-profit entities become aware of the required eligibility and documents for Section 12A Income Tax registration, they should proceed to find out about the registration process.
These pointers below highlight how to obtain 12A registration –
Step 1 – Apply in the required format online.
Step 2 – The commission may direct applicants to submit additional documents.
Step 3 – Once the commission is satisfied with the information availed, an order will be passed in writing, registering the organisation or trust in question.
In case the commissioner is not satisfied with the information received, he/she may convey the refusal to register the entity in writing.
The registration application under Section 12AA is filed under the jurisdictional commission of the Income Tax Department. Ideally, it takes 1-3 months to conclude the 12A registration process.
Also, Section 12AA(2) states that both approval or rejection order passed by the commissioner should be conveyed before 6 months (computed from the month-end in which the application in question was received).
One must also note that when a trust is registered, the registration comes with lifetime validity. It means as long as the trust is active, there is no need to renew it. However, under exceptional circumstances, the commissioner may cancel it.
The primary difference between Section 12A and Section 12AA is that the former provides clauses for the applicability of both Section 11 and 12. On the other hand, Section 12AA of Income Tax Act enumerates how to get registered under Section 12AA.
The collective advantage of Section 12A and Section12AA Registration are as follows –
So, to avail these benefits and to save on taxes, non-profit organisations should consider getting registered with Section 12A Income Tax Act. Subsequently, to maximise all benefits that come under the purview of Section 11 and Section 12, non-profit entities should find out about them in advance