12A registration is one time exemption obtained by most Trusts, right after incorporation to be exempted from paying income tax. Section 8 Company, Trusts and NGOs having 12A registration enjoy exemption from paying income tax on the surplus income of the Trust or NGO. Income tax exemption is available for all non-profit NGOs. Hence, it is important for all Trusts, NGOs and other Not-for-Profit organizations to be aware of Section 12A of Income Tax Act and obtain the same, soon after incorporation of the Trust or NGO. In this article, we look at the procedure for obtaining 12A registration in India.
Benefits of 12A Registration
The benefits of Section 12A Registration are as follows.
- The fund that is used for the charitable or religious purposes is considered to be the income application. The income application is nothing but the expenses used for charitable or religious purposes when calculating the income of the trust.
- The income received will be free from taxation.
- The person registered under this section can avail benefits for accumulating or setting aside income which is not more than 15% for the charitable or religious purposes.
- The accumulation of income, that is considered to be the income application according to Section 11(2) will not be included in the total income.
- NGOs are entitled to receive grants and funds from various agencies. These agencies are entrusted to provide grants to 12A registered NGOs.
- The Finance Act 2014 has extended benefits of registration for the trusts and institutions that have been registered under Section 12AA.
- The registration that is made under Section 12A, is a one-time registration. Once the registration is made, it will be active till the date of cancellation of the registration. There is no requirement of renewing the registration. Therefore, these benefits can be claimed whenever required by the NGO.
Eligibility for 12A Registration
Only Charitable Trusts, Religious Trusts, Societies and companies that come under Section 8 are eligible for 12A registration. 12A registration is not applicable for Private or Family Trust.
Documents Required for 12A Registration
The following documents must be submitted by the 12A registration applicant in Form 10A:
- Certified copy of the instrument under which the trust/institution was created/established, if applicable
- Certified copy of the document evidencing the creation of the trust or the establishment of the institution, if applicable
- Certified copy of registration with RoC/Registrar of Firms & Societies/Registrar of Public Trusts, whichever applicable
- Certified copy of the documents evidencing adoption or modification of the objects, if any
- Certified copy of the annual reports of the trust/institution for a maximum three immediately preceding financial years, if applicable
- Note on activities
- Certified copy of existing order granting registration under section 12A or section 12AA, if any.
- Certified copy of order of rejection of application for grant of registration under section 12A or section 12AA, if any.
The Income Tax Department has passed a notification on 19th February, 2018 with respect to the updated procedure for applying for 12A registration.
