A Brief about Form 10A and 10AB as per new Law on Registration of trust U/s 12A & 80G and Approval U/s 10(23C) & 35(1)

The Finance Act, 2020 has made changes leading to complete overhaul in the registration process of charitable and religious organisations. The procedure for registration of every organisation under the new scheme shall be completely electronic under a centralised database.

The Income-tax Department shall issue a National Unique Registration Number to all the charitable and religious institutions and thereby creating a National Database of exempt entities.

A new section 12AB has been inserted with effect from 1st April, 2021 dealing with the procedure of registration. Earlier, trusts or institutions were registered under section 12AA or under section 12A. 

Further provision of Section 10(23C) and 35 has also been amended. These amendments were originally introduced by the Finance Act, 2020 effective from 1^St June 2020, However, due unprecedent economic crisis, the government passed “The Taxation and Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020” as on 29^th September 2020 to defer the implementation of new procedure and make it effective from 1^st April 2021.

Further the rules relating to the provisions has also been amended by Notification 26^th March 2021

From 10A and 10AB has been prescribed in these new rules for the registration of the Trust U/s 12A & 80G and approval U/s 10(23C) sub-clause (iv) or (v) or (vi) or (via) & 35(1) sub-clause.

As per New law Form 10A or 10AB is required to be filed for re-registration/ fresh registration or approval as the case may be. Let’s find out who require to fill Form 10A and 10AB?

From-10A:

Cases where Form-10A required to fill 

1. Trust/Institute already registered under the previous law effective immediately before this amendment (i.e., before 1^st April 2021)

-          Fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or (v) or (vi) or (via) of section 10(23C) approved under the first proviso

-          Trust/ Institute registered under section 12A or 12AA

-          Institution/fund approved under the clause (vi) of section 80G(5)

-          research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of section 35(1)

Time limit: The time limit of 3months from the date on which the provision came into force. i.e., 30^th June 2021 is the time limit for application as the effective date is 1^st April 2021.

2. Trust/institute not registered under the previous law and want to make an application for fresh Registration or Approval under the new law or any other case then it required to file Form 10A.

-          Fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or (v) or (vi) or (via) of section 10(23C) approved under the first proviso clause (iv)

-          Trust/ Institute – [ sub clause(vi) Clause (ac) of section 12A(1)]

-          Institution/fund approved under the clause (vi) of section 80G(5) [ proviso clause (vi)]

Time Limit: At least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought

 

Note: List of Documents to be attached is given below the FORM-10A

 

 From-10AB:

 Cases where Form-10AB required to fill 

1. Trust/ Institute registered or approved as per the new law effective from the 1^st April 2021 and the period of approval is due to expire.

-          Fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or (v) or (vi) or (via) of section 10(23C) approved under the first proviso effective from 1^st April 2021

-          Trust/ Institute registered under section 12AB

-          Institution/fund approved under the proviso of clause (vi) of section 80G(5) effective from 1^st April 2021

Time Limit: Trust/ Institute should apply at least 6 months prior to the expiry of the period.   

 

2. Trust/ Institute provisionally registered* or Provisionally approved* as per the new law effective from the 1^st April 2021 and the period of Provisional approval is due to expire or activities has been commenced

-           Fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or (v) or (vi) or (via) of section 10(23C) approved under the first proviso effective from 1^st April 2021

-          Trust/ Institute registered under section 12AB

-          Institution/fund approved under the proviso of clause (vi) of section 80G(5) effective from 1^st April 2021

Time Limit : Trust/ Institute should apply

-        At least 6 months prior to the expiry of the period

                                                                Or

               -        Within 6 Months from the date of commencement of its activities 

 

3. Trust / institution has become inoperative due to the first proviso to sub-section (7) of section 11 [ sub clause(iv) Clause (ac) of section 12A(1)].

Time Limit : At least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative.

 

4. where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration [sub clause (v) Clause (ac) of section 12A(1)] 

Time Limit: Within a period of 30 days from the date of such adoption or modification.

Note: List of Documents to be attached is given below the FORM-10AB

*Provisional approval or registration will be given for a period of 3 years from the assessment year from which registration is sought

**Approval or Registration will be given for a period 5 years 

Relevant Rules: Rule2C, Rule5C, Rule11AA and  Rule17A

Disclaimer: The contents of this article have been prepared in accordance with the relevant provisions, and information available at the time of preparation. The views and opinions expressed in this article are those of the author and the author does not take any responsibility and cannot guarantee that no inaccuracy occurs. 

Is it mandatory to file ITR and audit report of the Trust/ institutes registered u/s 12A/12AA*

 

For the Trust/ institutes registered u/s 12A/12AA*, Is it mandatory to file ITR and audit report of the Trust/ institutes registered u/s 12A/12AA*?  let’s try to find answer step by step from the Starting:  

1.  Need of Registration U/s 12A/12AA*

Any Trust, Institutions established for Charitable and religious purpose, want to claim  the exemption U/s 11 and 12 of the Income Tax Act than registration U/s 12A/12AA* is required.

2. Form required to be filed for getting registration

Form 10A or 10AB ( as per the new amended Rules 2021), as the case may be required to be filed for obtaining registration under section 12A/12AA*.

3. Filing of Income Tax Return as per section 139(4A)

As per section 139(4A)

“Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year…….”

Means before claiming exemption u/s 11 and 12 if the total income is exceeding the basic exemption limit (currently Rs. 2,50,000), then it is mandatory to file income tax return.

4. Audit of books of accounts:

As per section 12A(1)(b):

“where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant…………………………………………. the report of such audit in the prescribed form duly signed and verified by such accountant……………”

In other words, if the total income is exceeding the basic exemption limit of Rs. 2,50,000 (currently) then books of accounts are required to be audited by the Chartered Accountant, And Audit report (Form 10B) require to be filed before the due date, specified for filing of audit report.     

5. Consequences on violating the provisions:

The question came now “what if trust or institute not filed return or audit report?”

So the consequences on not filing income tax return or audit report are:

(i).  Trust or Institute will not get exemption under section 11 and 12 for the year until it files Income tax return and audit report, even if it is registered under section 12A/12AA*.

(ii). Penalty of Rs.100 per day, under section 272A(2)(e), may be imposed on failure of filing of Income Tax Return.

Now next question came that “ Can trust File the Income tax return after the due date and get exemption if it file income tax return?”

Yes, the trust/Institute can file the return after the due date of filing of the return, But the exemption under section 11 and 12 cannot be claimed. Section 12A of the act prescribe the condition for claiming exemption U/s 11 and 12, and as per 12A(ba),

“the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section.”

And time prescribed U/s 139(4A) is the same as prescribed U/s 139(1), i.e. 31^St October of the relevant assessment year. ( as trust and institute required to file audit report under 12A(1)(b) ).  

 

Note: * As per the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, Section 12AA is not applicable w.e.f. 01-04-2021 and Section 12AB has been inserted.

 Disclaimer: The contents of this article have been prepared in accordance with the relevant provisions, and information available at the time of preparation. The views and opinions expressed in this article are those of the author and the author does not take any responsibility and cannot guarantee that no inaccuracy occurs.