What is Section 12AB of the Income Tax Act?
Section 12AB of the Income Tax Act, 1961, deals with the registration & operation of charitable organisations, trusts, & institutions that seek tax exemptions under the Income Tax law. The primary objective of Section 12AB is to bring transparency, standardization, & accountability in the functioning of such entities while ensuring they serve genuine charitable purposes.
Earlier, these organizations were registered under Section 12A or Section 12AA of the Income Tax Act. However, with effect from 1st April 2021, a new regime under Section 12AB of the Income Tax Act was introduced for fresh registrations & re-registrations of existing trusts.
Applicability of Section 12AB of the Income Tax Act
The applicability of section 12ab of the Income Tax Act extends to:
- Charitable trusts
- Religious trusts
- NGOs
- Societies
- Section 8 Companies Seeking Exemption
To continue enjoying the benefit of tax exemption on income, these entities must obtain registration under section 12ab the Income Tax Act. Without valid registration, the organisation becomes ineligible for the exemptions provided under Sections 11 & 12."
Registration under Section 12AB of the Income Tax Act
To apply for registration under Section 12AB of the Income Tax Act 1961, organizations need to:
- Submit Form 10A or Form 10AB online.
- Provide detailed documentation, including incorporation certificates, activity reports, & PAN.
Once satisfied, the Commissioner of Income Tax (Exemptions) shall pass an order in writing registering the trust or institution for five years. This five-year validity ensures periodic review & compliance.
New Section 12AB of Income Tax Act: Key Highlights
The new section 12ab of the Income Tax Act introduces:
- Mandatory re-registration for all existing registered entities.
- A time-bound process ensuring faster approvals or rejections.
- Automatic expiration of registration after five years unless renewed.
The government has made this shift to curb misuse & ensure that only genuine charitable organisations continue to enjoy tax benefits."
Bare Act Insights: Section 12AB of Income Tax Act 1961
The section 12ab bare act lays down that:
- The registration is entity-specific & activity-specific.
- Any change in the activities or the nature of the institution mandates a fresh application or modification.
- Non-compliance or deviation from stated objectives may lead to cancellation of registration.
This provision aims to ensure that registration under section 12ab of the Income Tax Act is granted only to organisations strictly adhering to the objectives of charity & public welfare.
Why Registration Under Section 12AB is Essential?
Charitable entities registered under section 12AB of the Income Tax Act receive the following benefits:
- Income Tax Exemption: Income derived from charitable activities is exempt under Sections 11 & 12.
- Eligibility for Section 80G Donations: Donors can claim deductions for contributions made to registered organizations.
- Credibility Boost: Registration builds trust with donors, government authorities, & stakeholders.
Section 12AB vs. Section 12AA: What Changed?
Before the introduction of section 12ab of the Income Tax Act 1961, trusts were registered under Section 12AA. The new system is more streamlined & time-bound, with greater scrutiny of activities.
Key differences include:
- Validity Period: Fixed 5-year registration under Section 12AB.
- Periodic Renewal: Mandatory renewals to ensure compliance.
Registration Under Section 12AB of Income Tax Act: Process & Timelines
The registration process under section 12ab income tax act pdf can be summarized in these simple steps:
- Filing Form 10A/10AB online.
- Submitting supporting documents.
- Examination by the department.
- Registration order for 5 years.
In case of discrepancies, the authority may call for additional information or even reject the application with reasons.
Extension & Re-registration: Key Things to Know
Charitable organisations registered under the new section 12ab of the Income Tax Act extension must apply for renewal six months before the expiry of the existing registration. Any delay can result in cancellation & loss of exemptions.
Conclusion: Stay Compliant, Stay Exempt
In conclusion, Section 12AB of the Income Tax Act is pivotal for every charitable trust or NGO that seeks to claim tax exemption & maintain credibility. Timely registration, adherence to compliance, & periodic renewal ensure seamless operations & continued tax benefits.
If you’re running an NGO, trust, or any charitable institution & need expert help with Section 12AB registration under the Income Tax Act, our team at Callmyca.com is here to make the process effortless for you. Click here to get started & secure your tax benefits hassle-free!
