12A

12A Registration:
Benefits of 12A Registration:

• The fund used for charitable or religious purposes is considered to be the application of the income. The income application refers to the expenses used for    charitable or religious purposes for calculating the taxable income of the not-for-profit organisation.

• The income received will be free from the charge of Income Tax.

• The person who is registered under Section 12A can avail benefits for accumulating or setting aside income. However, the income which is set aside should not be more than 15% of the amount applied towards charitable or other non-commercial purposes.

• The accumulation of income which is considered to be the income application shall not be included in the assessee’s total income.

• NGOs are entitled to receive grants as funds from domestic and international sources. These agencies are entitled to provide grants to NGOs which have obtained registration under this section.

• The registration which is granted under Section 12A shall be treated as a one-time registration. Once the registration is made, the registration will be active until the date of cancellation.

• In order to qualify for registration under Section 12A, the organisation should meet the definition of charitable purpose as defined in the Income Tax Act. Charitable purpose means relief to the poor, education, medical relief and activities undertaken with the objective of preserving the environment. The pursuit of any other objective of a public utility will also qualify for a charitable purpose.

• The primary qualifying criterion will be to check whether there is any profit motive involved in the activities carried on by the assessee. In the absence of a profit motive, registration shall be granted.

• If the assessee is carrying on activities related to trade or commerce, then the facility granted under this section is restricted. In such cases, registration is granted exclusively if the receipts from the trade activity are less than twenty per cent of the total receipts of the assessee.

• Also, it may be noted that 12A Registration is not applicable for Private or Family Trusts. The activities of the assessee should be genuinely for the benefit of the public.

  12A registration is generally applied for immediately after incorporation, Trusts and NGOs which have obtained 12A registration enjoy exemption from paying income tax on their surplus income. The 12A registration facility is available for all non-profit entities. Hence, it is necessary for all Trusts, NGOs and other Not-for-Profit organisations to be aware of Section 12A of the Income Tax Act. The purpose of the present article is to discuss the Benefits of 12A Registration, Eligibility for 12A Registration, Documents Required for 12A Registration, Procedure of obtaining 12A Registration.

The benefits of Section 12A Registration are the following:

Documents Required for 12A Registration:

Registration Proof: A self-certified copy of your registration with the relevant government authority, like the Registrar of Companies, Firms, or Public Trusts.

Object Modification: Copies of documents showing any changes made to your organization's objectives, if applicable.
Certificate and Founding Document: Your organization's registration certificate and its Memorandum of Association (MOA) or Trust Deed (two copies, self-attested by the NGO leader).

Landlord's Consent: If your registered office is in rented premises, a No Objection Certificate (NOC) from the landlord.

Tax and Utility Documents: A copy of your organization's PAN card, along with photocopies of an electricity bill, house tax receipt, or water bill.

Financial History: Self-certified copies of your organization's annual accounts for the three years before applying for registration.

Activity Overview: A brief note describing your organization's activities.

Previous Rejection, If Any: A self-certified copy of any previous rejection notice for registration under Section 12A or Section 12AA, if applicable. Your organization's registration certificate and its Memorandum of Association (MOA) or Trust Deed (two copies, self-attested by the NGO leader).

12A Registration Process:

• The application needs to be done using Form 10A, as per Rule 17A of the Income Tax Act, 1962. The application needs to be filed with the Jurisdictional Commissioner of Income Tax (Exemptions).

• Once the Form and the documents have been received, the Commissioner verifies the authenticity of the activities of the organization. He can call for additional documents and information as deemed fit.

• On the satisfactory report, he will pass an order in writing for grant of 12A Registration. In case the Commissioner is not satisfied he will reject the application after which the applicant is given a fair chance to be heard.

FAQ'S for 12A Registration:

Do applications under 12A and Section 80G of the ITA need to be filed together, or can they be filed separately?

Yes, it is possible to file applications under Section 12A and Section 80G separately.

What is the difference between Section 12A and Section 12AA of the ITA?

While Section 12A is related to trusts or social welfare institutions registered before 1996, Section 12AA deals with those incorporated after 1996.