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.