Section 12A of Income Tax Act

After being founded, a trust or non-profit organisation must register under Section 12A of the Income Tax Act to claim an exemption under Sections 11 and 12. Under Sections 11 and 12 of the Income Tax Act of 1961, Section 12A permits non-profit groups such as charitable trusts, non-profit organisations, welfare societies, religious institutions, etc., to claim full tax exemption. 

Non-profit organisations are those that do not operate for personal gain but rather for the benefit of society and its citizens. They are granted tax exemptions since their job is seen as a noble act, and they effectively carry out the duties that the government should carry out. Any non-profit trust or NGO’s financial gains or transactions will be regarded as taxable if they have not registered under 12A. Private or family trusts are not eligible for these exemptions and cannot register under 12A.

Section 12A Income Tax Act: Benefits 

One of the advantages provided by Section 12A is that when a trust, NGO, or institution establishes its operations, it is eligible to get a 15% tax rebate on its profits, provided that it invests the money in charitable or welfare endeavours. This specific sum obtained as a rebate cannot be used for any personal use.

To be eligible for funding from the Central or State governments, you must register under Section 12A.

Section 12A: Eligibility

The department of income tax establishes the requirements for qualification to register under Section 12A. According to the requirements, incorporated trusts, Section 8 businesses, and societies that promote public benefit without making a profit are qualified for Section 12A registration. Trusts and societies might be religious, benevolent, or welfare organisations to qualify. 

Private trusts or organisations controlled only by a family are ineligible for Section 12A registration. 

Once the trust or organisation is qualified, it must submit an online application for the 10A form. The applicant trust or organisation must have a digital signature to submit Form 10A. You can submit the 10A form electronically through the electronic verification code.

Section 12A: Registration documents required 

For trusts, societies, and organisations to register for Section 12A, additional important documents must be submitted along with the 12A registration form. The necessary documentation is as follows:

• Copy of a company’s or public trust’s registration with the registrar of firms and societies.

• A self-attested copy of the establishment of the trust or organisation.

• Evidence proving the establishment of the trust or society.

• Copies of the trust or society’s annual report that have been self-attested.

• The trust or society should provide a memorandum detailing all of its activities in full.

• A self-certified document with an existing order granting registration under Section 12A or Section 12AA should be provided by the trust, society, or organisation.

• A self-certified copy of the application rejection order is also required for the issuance of the registration.

Section 12A: Steps for registration

The following guidelines outline how to acquire 12A registration:

Step 1: Apply online using the appropriate format.

Step 2: If necessary, the commission could instruct applicants to submit additional documents further.

Step 3: After the commission approves the information provided, a written order registering the organisation or trust in question will be passed.

Section 12A: Points to remember 

• The commissioner may refuse to register the entity in writing if the information provided does not satisfy him or her.

• The Income Tax Department’s jurisdictional commission is where the registration application under Section 12AA is filed. Ideally, the 12A registration procedure should be completed within 1-3 months.

• Additionally, Section 12AA(2) mandates that any approval or denial order issued by the commissioner be communicated within six months (computed from the month-end in which the application in question was received).

• It’s important to keep in mind that once a trust is registered, the registration is valid for a lifetime. It means that the trust does not need to be renewed as long as it is in effect. The commissioner may, however, cancel it in exceptional circumstances.

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