What exactly is Section 12AB?
Previously, an NGO’s registration to have its income exempted from tax was done under Section 12AA. Following Section 12A registration, all income is exempt from taxation. If an NGO does not obtain 12A registration, income tax is due on any surplus during the fiscal year. According to the new Compliance with regard to Sections 12A and 12AA, all NGOs that currently have exemption under Section 12AA of the IT Act must reapply for the same by March 31, 2022. (As extended). Section 12AB requires that you obtain new registration.
Section 12AB Registration Terms and Conditions
All existing registered trusts under sections 12A or 12AA would be transferred to the new section 12AB.
Newly established trusts and institutions that apply to income tax for the first time will be granted provisional registration for three years.
The preliminary registration is valid for three years.
An application for renewal of provisional registration or rather registration must be made within 6 months of the completion of three years of provisional registration.
All registrations under Section 12A or 12AA, once completed, will be required to renew their registration every 5 years.
After processing your application, income tax may re-validate your trust or institution’s registration under sections 12AA and 80G for a period of 5 years.
What Are the Advantages of a 12AB Registration?
The following are the advantages of 12AB Registration:
● Assist in the Provision of an Elect ● ronic Database
● Section 12AB was enacted in order to create an electronic database.
● To Remove Odds From Existing Trusts
● The trust registered under the old section, on the other hand, has misplaced their registration number, and the Income Tax Department has no record of it. The work will be done electronically with the introduction of Section 12AB.
● Avoiding Difficulties Through Various Facilities
● Newly formed Trusts are having difficulty because no activities have begun. Section 12AB has alleviated the New Trust’s difficulties by providing a variety of facilities.
Who is Eligible for Registration Under Section 12AB of the Income Tax Act?
To continue receiving exemption under section 10 or 11, all new and existing charitable and religious institutions (including NGOs) registered under the following sections are required to move to section 12AB for new registration:
● 12A Section
● 12AA Section
● Section ten (23C)
● 80G Section
● Furthermore, various institutional trusts registered under section 10(23C) or section 12AA must renew their registration under section 12AB. As a result, Section 12AA, which governs the registration process for Trusts or Institutions, will be repealed, and a new Section 12AB will take effect on the earlier of the following dates:
● The date of registration granted under Section 12AB, or
● The deadline for submitting the application for registration and approval.
What Documents are Required for 12AB Registration?
For registration under 12AB, various documents are required. The following are the documents that must be submitted:
● In the case of a corporation, the Certificate of Incorporation and the Memorandum of Agreement.
● A copy of the trust’s PAN card
● In the event of a trust-Trust deed (2 self-attested copies by the Managing Trustee)
● In the case of rented property, a letter of authorization from the landlord is required.
● Proof-Utility Bill Copy, i.e. Electricity Bill, Water Bill, House Tax, and so on, for the owned property.
● Evidence of the trusts’ charitable activities. Also, a progress report for the last two years or since inception.
● Accounts, balance sheets, and income tax returns for the last three years or since inception (If any).
● Donor information, including identification and address proof
● Details about the governing body or members of the trust/institution.
What is the Registration Procedure for the 12AB?
The procedure for registering under Section 12AB of the Income Tax Act of 1961 is not specified. However, the following steps must be taken: –
The application for 12AB can be made by submitting Form 10A online at incometaxindiaefiling.gov.in.
Form Section 12AB is available on the income tax website under the Income Tax Forms Section, which is visible after logging in.
The application must be submitted to the appropriate authority online by submitting Form 10A along with the required documents to the Commissioner or Principal Commissioner.
After reviewing the application, the Commissioner or Principal Commissioner must issue an order granting approval or rejection within three months of the effective date of the new provisions.
Furthermore, if the Commissioner or Principal Commissioner is not satisfied that the charitable trusts or institutions, etc. have complied with the objects mentioned or with any other law, the registration of the charitable institution, etc. shall be cancelled. However, before cancelling the registration, the authority will give the applicant a reasonable opportunity to be heard.
What is the duration of the Section 12AB Registration?
The registration granted under Section 12AB is valid for a period of five years. Provisional registration, on the other hand, is only valid for three years. All registrations granted under section 12AB are subject to renewal in accordance with the new registration scheme.
What is the 12AB Division of Registration?
According to the current registration method, which takes effect on April 1st, 2021, registration can be divided into the following categories:
● Existing trusts that were registered under Sections 12A/12AA must be re-registered under Section 12AB.
● Provisional Registration is also included in the process of converting Provisional Registration to Normal Registration.
● Section 12AB grants registration renewal.