Overview

12AA registration is done for the purpose of getting exemption from income tax. After this registration all the income of the organization cannot be taxed. Form 10A is used to fill the application form for 12AA registration. The Commissioner of Income Tax Department, which has jurisdiction over the institution, is responsible for processing your registration application under Section 12AA. The rebate on income tax is available to all NGOs, but only they are aware of it and can take advantage of it. Therefore, to entertain the benefit of exemption limit it is necessary for all NGOs, trusts and other non-profit organizations to be aware of Section 12AA of the Income Tax Act.

Form 10A

Organizations that are willing to be registered under Section 12AA will have to file Form 10A. Organizations such as Charitable Trusts, Religious Trusts, Societies and Section 8 Companies are eligible to apply for Section 12AA registration. The 12AA registration process has been made online with the Form 10A filing and can only be made possible with the digital signature of the signatory. / />

Required Documents

• 12AA registration applicant needs to submit the following documents along with Form 10A:
• Instrument’s self-certified copy which was used in the process of creating trust or establishing the institution shall be submitted.
• A foundation or trust may have been built in any case compared to the method for formatting and registering an instrument. In such cases, a self-attested copy of the document confirming the creation of the trust or the foundation of the institution should be submitted to the Income Tax Department.
• Provide a self-attested copy of the registration, which was created with the relevant body. The relevant bodies may be registrars of companies, registrars of firms and societies, or registrars of public trusts.
• A self-attested copy of the document that serves as a proof at the time of adoption or change in the entity's purpose will be presented.
• Financial report of maximum three preceding financial institution of trust / financial year.
• Focus on the activities that the entity performs
• There are certain matters which may compel the Income Tax Department to cancel the registration issued under this section. However once the assessee has resolved the problem he can file for a later application. In such a scenario, it is necessary for the applicant to present a self-attested copy of the current order issuing the registration.
• If the application of the assessee of the case is rejected, he has to attach a self-attested copy of the order of re-order with the application.

Eligibility Criteria

• One of the primary criteria for obtaining registration under Section 12AA is that the purpose behind the existence of the organization is to do charitable work as defined in the Income Tax Act. Involvement in charitable activities includes providing education, providing medical relief to the poor and doing activities aimed at curbing the environment.
• Before giving any registration certificate under section 12AA, the government officials shall check whether the purpose of any profit is involved in the conduct of the activities, if not, registration is allowed under section 12AA.
• If the assessee is involved in activities such as trade or commerce, the services provided under this section are limited. In such cases, registration is granted only to those applicants, whose receipts from business activity are less than twenty percent of the total receipts of the assessee.
• Private or family trusts are not eligible to apply for Section 12AA registration.

Registration process

• Once you submit the application in the format available online, the commissioner will ask you to submit additional documents as per the additional requirements. A request for further verification of documents will help prove the genuineness of the organization's activities.
• If the commissioner is happy with the application, he will register the trust or institution under section 12AA, all the commissioners have to pass an order to initiate the registration process.
• The provision of section 12AA (2) states that the right to register before the expiry of six months from the end of the month in which the application was received.
• 1 to 3 months long registration in India is considered as 12AA registration. In any case, when a trust receives registration, it is valid for the lifetime of the trust and there is no requirement for renewal.

Servzone Procedure

Benefits

• The fund you are planning to use for charitable or religious purpose will be considered as income application. In common term, income application is treated as an expense that is spent by the trust on a charitable or religious purpose.
• Final income received will be exempt from tax
• Organizations or individuals registered under this section may take advantage of the accumulation of income which cannot exceed 15% for charitable or religious purposes.
• Section 11 (2) considers the accumulation of income as the application of income hence it is not included in the total income.
• NGOs get the benefit of obtaining multiple permits from the government and other agencies. There are agencies that provide financial support to NGOs and these agencies generally prefer to grant grants to 12AA registered NGOs.’s.
• Registration made under Section 12AA is a lifetime process. Once registered, it remains valid until the date of the registration cancellation. The 12AA registration is not required to be renewed so it can be considered a benefit of profit by non-governmental organizations.

12AA cancellation

Where a trust or an establishment is allowed registration under section 12AA (1) (b) or whenever it obtains registration under section 12A as it is under the Finance (No. 2) Act, The commissioner or commissioner of income tax remained before the reform by 1996 can leave registration with two sub-sections:

Cancellation of registration of trust or institution under Section 12AA (3)

In order to give the concerned Trust or Foundation a fair chance of being heard, the Principal Commissioner or Commissioner, pass a request under section 12AA (3) in writing, canceling the registration with two conditions:

• Actions of a trust or foundation are not true, or
• Actions are not being performed according to the objects of trust or foundation.

Cancellation of registration under Section 12AA (4)

Therefore to defend the provisions relating to the cancellation of the registration of a trust, section 12AA (4) was embedded to state where a nomination has been accepted to a trust or foundation, and as such It has been observed that Section 13 (1) is applicable because its activities are being done in such a manner that

• It is for the benefit of a specific religious community or caste (in the event that it is established after the introduction of the Income Tax Act);
• Any salary or property of the trust is applied for the benefit of the determined people such as the trust, the trustee, and the like owner ;; Or
• Its assets put resources in restricted mode,
• At that point the Principal Commissioner or Commissioner may choose to pass an order in writing, canceling the registration of such trust or institution.

In any case, registration will not be dropped under Section 12AA (4) if such a belief or basis is proved that there was a genuine reason for conducting the above mentioned activities.