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12AA Registration

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  • Overview
  • Benefits
  • Differences
  • Documents
  • Eligibility
  • Process
  • Cancellation
  • Fees
  • FAQs

What is 12AA Registration?

The purpose of 12AA registration is to obtain income tax exemption. Once this registration is complete, the organization's entire income is exempt from taxation. To complete the application for 12AA registration, Form 10A is used. The officer in charge of processing applications for registration under section 12AA is the Commissioner of Income Tax Department, who has jurisdiction over the institution. All NGOs are eligible for income tax exemptions, but only those who are aware of them can take benefits of 12AA registration. Therefore, all NGOs, Trusts, and other Not-for-Profit organizations must be aware of Section 12AA of the Income Tax Act in order to consider the benefit of the exemption limit.

Form 10A

Form 10A must be filed by organizations that want to register under Section 12AA. Applications for Section 12AA registration are accepted from entities such as Societies, Charitable Trusts, Religious Trusts, and Section 8 Companies. The 12AA registration process and Form 10A filing are now done online, and they are only accessible with the signatory's digital signature.

 

What are the Benefits of 12AA Registration?

  • The fund you intend to utilize for religious or philanthropic purposes will be considered an application for income. Income application refers to a cost that the trust bears for charitable or religious purposes. 
  • The entire amount received will not be subject to taxes.
  • An organization or individual registered under this provision may benefit from the accumulation of income for charity or religious purposes, up to a maximum of 15%.
  • Because Section 11(2) views Income accumulation as application of income, it is not included in total income
  • NGOs enjoy several advantages like obtaining several permits from the government and other organizations like private corporations. There are organizations that give NGOs financial help. They prefer those NGOs who are registered under 12AA. 
  • Registration which is done under Section 12AA is a one time process. Registration once done, remains valid till the date of cancellation of the registration. There is no need to renew 12AA registration does not need to be renewed hence it is considered beneficial for the NGOs.
  • Registered trusts and institutions are exempted from payment of income tax on their income generated from charitable or religious activities. This can save them a significant amount of money, which can be used to fund their programs and services.
  • Donations made to registered trusts and institutions are deductible from the donor’s taxable income. This makes them more attractive to donors, as it allows them to reduce their tax burden.
  • Registered trusts and institutions are eligible to receive foreign contributions under the Foreign Contribution (Regulation) Act, 2010. This provides them access to funding from international companies and donors.
  • 12AA registration is a sign of recognition and credibility for trusts and institutions. It portrays that the trust or institution has been examined by the Income Tax Department and meets set standards of transparency and accountability.

 

What is Difference between 12AA and Other Sections?

There are many sections in the Income Tax Act that are applicable to charitable and religious trusts and institutions. These include:

  • Section 80G : This section declares a deduction in taxable income if any donations are made to certain religious and charitable institutions. 
  • Section 35AC : This section provides a deduction in taxable income for certain expenses done by religious and charitable institutions. The main difference between Section 12AA and other sections is that Section 80G and Section 35AC do not require registration for providing exemption, on the other hand in Section 12AA registration is required for a trust or institution to be eligible for certain tax benefits, such as exemption from income tax. Another major difference is that Section 12AA registration is done by the Income Tax Department, while Section 80G and Section 35AC are self-assessed by the taxpayer. This means that the taxpayer can himself determine if their donation is eligible for a deduction under these acts or not. 

 

What is the Documents Required for 12AA Registration?

An applicant must submit the following documents attached with Form 10A for 12AA registration:

  • A self-certified copy of the instrument used for registering trust or institution is required. 
  • The trust or foundation may have been made in any case than by method for drafting and registering an instrument. In such cases, a self-attested copy of the document confirming the creation of the trust, or foundation of the institution ought to be submitted to the Income Tax Department.
  • A self-attested copy of the registration done with the relevant body like the Registrar of Companies, the Registrar of Firms and Societies or Registrar of Public Trusts is needed. 
  • A self-certified copy of the document which is an evidence at the time of adoption or during alteration of the objective of the entity shall be submitted.
  • Financial report for maximum three preceding financial years.
  • A Note of activities performed by the entity
  • There may be a few cases in which the Income Tax Department may cancel the registration issued under this section. Though once the applicant has resolved the issue pointed by the authorities, he/she can file for the subsequent application. In such situations it is required for the applicant to submit a self-certified copy of the existing order issuing registration. In case an application has been rejected, a self-certified copy of the order of rejection with the application needs to be attached. 

 

Who is Eligible for 12AA Registration?

  • To get registration under Section 12AA, the organization must be involved or associated with charitable activities as defined in the Income Tax Act. Some examples of charitable activities include Relief of poverty,  Providing education to the needy, Medical relief, Healthcare, Environmental protection, Advancement of religion, Promotion and conservation of art and cultural activities, Development of rural areas and Upliftment of marginalized communities.
  • Similarly to get registration under Section 12AA, the organization must be involved or associated in religious activities. Some examples of religious activities include- Organizing cultural events and festivals, Religious education, Maintenance and construction of religious buildings etc
  • Before granting registration under Section 12AA, concerned authorities shall check whether there is any profit motive involved or not. If no profit motive is found, registration under Section 12AA is granted.
  • If the applicant is involved in commercial activities, then the services offered under 12AA are limited. In these cases, registration is permitted to those applicants whose receipts from the trade activity are less than twenty percent of the total receipts. 
  • Family Trust  and Private Trust are not eligible to apply for Section 12AA registration.
  • Bodies seeking 12AA registration must be registered under the Indian Trust Act 1882 or other applicable law. 
  • They must only be formed for religious  and charitable purposes only.
  • Their activities must be genuine and in accordance with their declared objects.
  • They must have adequate finances and accounting and auditing facilities. 

 

What is 12AA Registration Process?

The 12 AA registration process involves the following steps:

  • Submit the application online in the prescribed format. You may be asked by the Commissioner to produce additional documents as per the additional requirements. This additional verification of documents will help in proving the credibility of the activities of the organization.
  • Once the Commissioner is satisfied with the application, he/she shall register the Trust or Institution under Section 12AA.
  • The provision of Section 12AA(2) narrates that the registering authority must pass the order for granting or refusing registration under 12AA  before the expiry of six months from the end of the month in which the application was moved and received. 
  • 12AA registration takes somewhere between 1 to 3 months. When a Trust acquires registration under 12AA, it is valid for the lifetime and there is no need for renewal.

 

How to File Form 10A on the New E-Filing Portal?

Applicants can now file form 10A on the online portal as well. Below are the steps involved in filing Form 10 A online:

  • First of all, open the income tax department website. Here navigate to the e-filing platform and click on the submit/return forms option. 
  • Next, log in by creating a username and password.
  • Now, move to the Forms corner and select 10A from the menu. Also, choose the year of assessment and submission mode.
  • Click on 'Prepare and Submit Online' and fill out the application.
  • After completing the application, you will be demanded other required documents by the income tax commissioner.
  • After the organization gets a 12AA certificate, it is valid for the organization's lifetime. No renewal for the 12AA certificate is needed.

 

What is 12AA Registration Cancellation?

When a Trust, Establishment or an NGO is registered under Section 12AA(1)(b) or has acquired registration whenever under Section 12A as it remained before the correction by the Finance (No. 2) Act, 1996, either the Principal Commissioner or the Commissioner of Income-tax can cancel the registration under the accompanying two sub-sections:

Cancellation of Registration of Trust or Establishment under Section 12AA(3)

The Commissioner or Principal Commissioner of Income Tax, when providing reasonable chance of being heard to the trust or foundation in question, may pass a request under Section 12AA(3) in written to cancel the registration under the accompanying two conditions:

  • the activities of a trust or foundation are not changeable, or;
  • the activities of the foundation are not being carried out as per the objects of the trust or foundation.

 

Cancellation of Registration under Section 12AA(4)

To defend the provisions related to cancellation of registration of a trust/NGO, section 12AA(4) was enacted to give that where a trust or a foundation has been conceded enrollment, and where section 13(1) is applicable as its activities are being done in such a way, that

  • It is to the advantage of a specific religious community or caste 
  • Any property or salary of the trust is applied for advantage of persons like owner of trust, trustees, and so on or
  • Its assets or resources are put  into restricted modes,
  • In these cases the Commissioner or Principal Commissioner Commissioner may choose to pass an order in writing stating the cancellation of registration of such trust or institution.

However registration will not be canceled under Section 12AA(4) if such in cases where trust or foundation proves that there was a genuine reason to conduct the above mentioned activities.

Updates under 12AA of the Income Tax Act

The government has updated some new changes in section 12AA. We will look at what the changes are:

  • If any organization registered under section 12A of the income tax act receives a monetary amount, it will not be eligible for income application for charitable or religious purposes.
  • Any permanent donations like corpus donations are not applicable for an application of income for any non-profits under 12A of the income tax act.
  • Suppose an organization registered under section 12AA undergoes specific modifications that don't follow the registration guidelines. In that case, the organization will have to apply for a new registration within a month from the date of the modifications.
  • The amount of receiving of property by a person from any trust will be considered taxable under the heading' income from other sources.'
  • If a person receives property from a foundation university, or hospital or any firm registered under 12AA of the income tax act, then clause 56 is not applicable here. The government has set a limit of rupees two thousand for the tax deduction. Under Section 80G of Income Tax Act, donations exceeding 2000 rupees will not be applicable for deduction when paid by any mode other than cash. Earlier, the set limit was ₹10,000.
  • Every organization which is registered under the 12AA section of the income tax act is eligible for tax exemption. It also receives essential benefits from the income tax department. The government has made provisions for separate grants for every organization registered under section 12AA.

 

What is 12AA Registration Fees?

FAQs

Ans: You can register a trust under section 12A of the income tax act by filing an application on the income tax website.

Ans: Yes, you can apply for both applications together. In case you want to apply separately, apply for section 12AA registration first. It is compulsory to obtain a 12AA certificate for registration under 80G of the income tax act.

Ans.: 12 AA registration refers to the registration under Section 12AA of the Income Tax Act, which grants tax exemption to charitable trusts, religious organizations and organizations doing social work.

Ans: Any charitable trust, society, or section 8 company engaged in genuine charitable activities and/or religious activities is eligible for 12 AA registration.

Ans: To apply for exemption under Section 12 AA, you need to submit the application via Form 10A to the Income Tax Department, attached with all necessary documents and details of activities.

Ans: Documents needed for 12AA registration include trust deed, memorandum of association, articles of association, PAN, and details of trustees or members.

Ans: Section 12 AA registration has several benefits for eligible organizations. It provides tax benefits to donors, promotes philanthropy by individuals and corporations alike, and also exempts the organization from income tax liabilities.

Ans: Processing time of 12 AA registration varies depending upon the nature and work of organization and format of application filed, but it generally takes a few months. Regular follow-ups can accelerate the process.

Ans: Yes, those foreign organizations who are engaged in charitable activities in India are also eligible to apply for 12 AA registration.

Ans: Some major benefits of 12 AA registration include- Tax exemption on income, eligibility for grants, and increased credibility in the eyes of donors and stakeholders.

Ans: For organizations registered under section 12AA, certain profit-generating activities are restricted. Such organizations who are exempted must primarily focus on charitable activities.

Ans: No 12 AA registration is not mandatory, but it is advised that non-profit organizations avail 12 AA registration for tax benefits.

Ans: The status of 12AA registration can be checked online on the official website of the Income Tax Department.

Ans: Yes, if an organization gets involved in other activities which are not part of its mandate or it diverts from its prescribed objectives it can lose its registration.

Ans: 12 AA allows tax exemption to the organizations involved in charitable work whereas 80G allows donors to claim tax deductions for their contributions.

Ans: Yes, any and all Trust, Society and Section 8 Company are qualified to apply for 12 AA registration.

Ans: No, once the registration is granted under 12AA, it is generally valid unless revoked by the Income Tax Department.

Ans: No, organizations registered with Section 12AA  enjoy tax exemption on their income.

Ans: The role of Income Tax Department involves review of applications, checking compliance requirements, and grants 12AA registration based on the organization's activities.

Ans: Yes if their 12AA registration application is rejected, organizations have the option to appeal to the Commissioner of Income Tax (Exemptions).

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