All the existing charitable and religious institutions (including NGOs) which are registered or approved under the following sections:
Section 12A
Section 12AA
Section 10(23C)
Section 80G
Are compulsorily required to switch to section 12AB/proviso of section 10(23C) for fresh registration or to section 80G(5)(ix) for fresh approval. The Finance Minister in her Budget Speech iterated the fact of the new method of registration. The extract of her Budget Speech is reproduced below:
“Further, in order to claim the tax exemption, the charity institutions have to be registered with the Income Tax Department. In the past, the process of the registration was completely manual and scattered all over the country.
In order to simplify the compliance for the new and existing charity institutions, I propose to make the process of registration completely electronic under which a unique registration number (URN) shall be issued to all new and existing charity institutions. Further, to facilitate the registration of the new charity institution which is yet to start their charitable activities,I propose to allow them provisional registration for three years.”
Currently, several hospitals, schools and colleges are registered simultaneously under section 10(23C) and 12AA. Charitable trusts and intuitions currently registered under both section 10(23C) and section 12AA will now be required to apply for revalidation or renewal of either the approval under section 10(23C) or registration under section 12AB, but not both.
Section 12A/12AA dealing with the procedure for registration of a charitable trust will cease to be applicable from 1st June, 2020 (Now extended to 1st October, 2020); instead, a new section 12AB has been inserted prescribing the procedure for fresh registration. Charitable trusts and institutions which are already registered under section 12A or section 12AA of Income Tax Act, 1961 will now be required to reapply online for registration by 31st August, 2020 (Now extended to 31st December, 2020). Provisions of registration under section 12AA or section 12A will become redundant from 1st June, 2020 (Now extended to 1st October, 2020) and a new section 12AB of income tax act shall come into force with effect from 1st June, 2020 (Now extended to 1st October, 2020). All the existing registered trusts under the erstwhile section 12A or section 12AA would move to new provision section 12AB. Further, instead of the CIT (Exemption), an application is required to be made to the Principal Commissioner of Income-tax or Commissioner of Income-tax.
Likewise Section 10(23C) dealing with the procedure for registration of an educational institution or a hospital will cease to be applicable from 1st June, 2020 (Now extended to 1st October, 2020); instead, a new proviso after section 10(23C)(vi) and section 10(23C)(via) has been inserted prescribing the procedure for fresh registration. An educational institution or a hospital which is already registered under section 10(23C)(vi) or section 10(23C)(via) of Income Tax Act, 1961 will now be required to reapply online for registration by 31st August, 2020 (Now extended to 31st December, 2020). Provisions of registration under section 10(23C)(vi) or section 10(23C)(via) of Income Tax Act, 1961 will become changed from 1st June, 2020 (Now extended to 1st October, 2020) and a new proviso after section 10(23C)(vi) and section 10(23C)(via) of Income Tax Act, 1961 shall come into force with effect from 1st June, 2020 (Now extended to 1st October, 2020). Further, instead of the CIT (Exemption), an application is required to be made to the Principal Commissioner of Income-tax or Commissioner of Income-tax.
Section 80G(5)(vi) dealing with the procedure for approval of a charitable trust will cease to be applicable from 1st June, 2020 (Now extended to 1st October, 2020); instead, a new section 80G(5)(ix) has been inserted prescribing the procedure for fresh approval. Charitable trusts and institutions which are already approved under section 80G(5)(vi) of Income Tax Act, 1961 will now be required to reapply online for approval by 31st August, 2020 (Now extended to 31st December, 2020). Provisions of approval under section 80G(5)(vi) will become redundant from 1st June, 2020 (Now extended to 1st October, 2020) and a new section 80G(5)(ix) of income tax act shall come into force with effect from 1st June, 2020 (Now extended to 1st October, 2020). Further, instead of the CIT (Exemption), an application is required to be made to the Principal Commissioner of Income-tax or Commissioner of Income-tax.
The Government intends to create a National Register of all charitable and religious institutions and the Income Tax Department will issue an electronically generated Unique Registration Number (URN) to all charitable and religious institutions. The process of revalidation of all the charitable and religious institutions will enable the Government to weed out all the inactive and defunct charitable institutions. In the past, many registered trusts were found engaged in malpractices for private profiteering rather than doing any genuine social work. The department wants to curb those practices. The renewal of registration after every five years will provide an opportunity to withdraw the exemptions without going through the complicated cancellation provisions.
An order granting registration or approval shall be passed within 3 months of the application. Such registration or approval shall be valid for 5 years.
The compliance burden on Charitable Trusts and Exempt Institutions goes further to file statements of donation received and issue of donation certificates to donors in line with TDS provisions. Hefty fines and penalties are imposed for any failure to file such statements.
Presently, a charitable trust or an institution which are registered for several decades under section 12A or section 12AA or section 10(23C) of the Income Tax Act, 1961 are not required to renew the registration. A registration once granted under section 12A or section 12AA or section 10(23C) remains valid for the perpetual period unless it is withdrawn or cancelled under section 12AA(3) or section 12AA(4). Similarly, all approvals under section 80G expiring after 1st October 2009 shall remain valid in perpetuity unless specifically cancelled or revoked. Prior to an amendment by Finance Act, 2009, approval under section 80G were required to be renewed after the validity period.
The amended provisions of section 12A/12AA/10(23C)(vi)/10(23C)(via)/80G of income tax act are tabulated as under:
(i) Time limit to make an application for re-registration/re-approval under different situations:
(ii) Time limit to file Tax Audit Report:
(iii)Time limit to grant the registration/approval by the Principal Commissioner or the Commissioner after the receipt of an application:
(iv) Any registration granted under section 12AB or section 10(23C)(vi) or section 10(23C)(via) or approval granted under section 80G(5)(ix) can be cancelled subsequently, if the Principal Commissioner or the Commissioner is satisfied that:
(a) the activities of the trust or institution are not genuine; or
(b) are not carried out as per the objects of the trust or institution; or
(c) the trust or institution has not complied with the requirement of any other law for the time being in force as is material for the purpose of achieving its objects and the order or direction or decree, by whatever name called, holding that such non-compliance has occurred has attained finality or has not been disputed,
after giving a reasonable opportunity of being heard to the trust or the institution.