12A registration 12A registration is a one-time registration granted by the Income Tax Department to NGOs and not to other profit making organizations. The purpose of registration is to exempt from payment of income tax. 12A registration is usually applied immediately after incorporation. Section 8 companies, trusts and NGOs who have obtained 12A registration enjoy exemption from paying income tax on their surplus income. The 12A registration facility is available to all nonprofits. Therefore, all trusts, NGOs and other non-profit organizations are required to be aware of Section 12A of the Income Tax Act. The purpose of the present article is to discuss the process of
obtaining 12A registration.
Benefits of 12A registration Following are the benefits of Section 12A registration: Funds used for charitable or religious purposes are considered applications of income. Income application refers to expenses used for charitable or religious purposes to calculate the taxable income of a non-for-profit organization. Income received will be free from income tax charges. A person who is registered under section 12A can avail the benefit of depositing or establishing income on one hand. However, the income that is set aside should not exceed 15% of the amount applicable for charitable or other non-commercial purposes. Accumulation of income which is considered as income application will not be included in the total income of the assessee. Non-governmental organizations are entitled to receive grants from domestic and international sources. These agencies are entitled to provide grants to NGOs who have received registration under this section. The registration granted under Section 12A will be treated as one-time registration. After registration, the registration will remain active till the date of cancellation. There is no need to renew the registration from time to time. Therefore, registration benefit NGOs can be claimed if required. Eligibility for 12A registration To qualify for registration under section 12A, the organization must meet the definition of charitable purpose as defined in the Income Tax Act. Charitable purpose means activities done for the purpose of relief to the poor, education, medical relief and protection of the environment. The pursuit of any other purpose of public utility would also qualify for a charitable purpose. The primary eligibility criterion would be to check whether any profit motive is involved in the activities undertaken by the assessee. In the absence of profit motive, registration will be allowed. If the assessee is being taken on activities related to trade or commerce, then the facility given under this section is prohibited. In such cases, registration is exclusively granted if the receipts from business activity are less than twenty percent of the total receipts of the assessee. In addition, it may be noted that 12A registration is not applicable for private or family trusts. The activities of the assessee should actually take place for the benefit of the public. Form 10A Form 10A is a form that must be filed by the entities that wish to register under Section 12A. The process of applying for Section 12A registration and the process of filing Form 10A has been exclusively done online. Online filing process is possible only with digital signature. To apply under section 12A, the digital signature of the trust's founder or author must be affixed. To obtain registration under Section 12A, an application for registration of a charitable or religious trust or institution can be made in Form 10A. Applications must be made in online mode essentially. The application will be addressed to the Commissioner of Income Tax along with the necessary documents. Documents required for 12A registration The institution or trust can be prepared as an instrument through instrumentation or registration. In such cases, a self-attested copy of the certificate of creation of the trust, or establishment of the institution, should be submitted to the Income Tax Department. It is necessary to present a self-attested copy of the registration, which was made with the applicable body. Applicable bodies may be registrars of companies, registrars of firms and societies, or registrars of public trusts. A self-attested copy of documents that provide evidence to adopt or amend the objectives of the entity. Annual financial statements for the three preceding financial years Focus on activities conducted by the unit. In some cases, the Income Tax Department may cancel the registration granted under this section. How to apply for section 12A registration online To obtain registration under Section 12A, the eligible organization has to file Form 10A. If the applicant has a digital signature, the Form 10A can be filed online. If you do not need a digital signature to file your income tax return online, you can file Form 10A electronically through an electronic verification code. The application for Section 12A registration has been officially filed with the Jurisdictional Commissioner of Income Tax. Documents required for registration under Section 12A Apart from the filled Form 10A, you will also have to submit some important documents while filing for Section 12A registration. Following importance