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Exemptions under Section 12A and Section 80G, Section 12A, Section 80G, Section 12AB

Changes in Norms for Charitable Institutions- Exemptions under Section 80G and 12A / 12AA

Charitable purpose includes relief of the poor, education, medical relief, preservation of environment and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. The tax norms in India have always been such for Charitable Institutions that provide certain kinds of exemptions under Section 80G and Section 12A the Income Tax Act.

 

Recently in Budget 2020 presented on 1st February 2020, FM Nirmala Sitharaman proposed some changes in the existing norms for exemptions under Section 80G and Section 12A. It was decided that all these amendments would be made effective w.e.f. 1st June 2020.

 

Latest Update

The new compliances under the mentioned Sections i.e under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Income Tax were to be completed till 31st August, 2020 which was extended till 31st December 2020. Then again the same scheme was extended to 01.04.2021 and 30th June 2021 and 31st August respectively.

 

Now looking in to the current situation the CBDT has again extended the due date for the application under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act in Form No. 10A/ Form No.10AB, for registration/ provisional registration/ intimation/ approval/ provisional approval of Trusts/ Institutions/ Research Associations etc. has been extended till 31st March, 2022 and hence now all existing trust have to re-register themselves on or before 31.03.2022.

 

Section 12A

It is a registration done by an NGO to get an organization income exempted from Tax. All income shall not be taxable after Section 12A Registration. If an NGO does not get 12A Registration, income tax is payable on surplus during the year.

Section 80G

80G Registration under Section 80G of Income Tax Act provides benefits to the donor of an NGO. The donor gets financial benefits in his taxable amount of their income.

The proposed changes in the norms for Exemptions under Section 80G and Section 12A

  • All the existing charitable and religious institutions already registered under Section 12A, Section 12AA, Section 10(23C) and Section 80G will be required to re-apply to the income tax authorities to re-validate their existing registrations.
  • All Charitable trusts and exempt institution which are already registered under Section 80G, 12A or Section 12AA of Income Tax Act, 1961 will now be required to obtain Fresh Registration by December 31, 2020.
  • All the existing registered trusts under the Section 12A or Section 12AA or Section 80G would move to new provision “Section 12AB” w.e.f 1st April 2021.
  • The process will be online and the new online form will particularly focus on whether the charitable activities of the trust or institution are genuine.
  • Once the online forms are ready there will be a window of three months within which application must be submitted. Trusts and institutions may do this on their own or through their auditors or practicing chartered accountants.
  • After processing your application, your trust or institution’s registration under Section 12AA and 80G may be re-validated by income tax for a period of 5 years.
  • Application for renewal after 5 years must be made at least six months prior to the expiry of the five years validity period.
  • Newly established trusts and institutions applying to income tax for registration for the very first time will be given provisional registration for three years.
  • The provisional registration will be valid for three years.
  • Prior to 6 months from the completion of three years provisional registration, an application for renewal of provisional registration or rather registration has to be made.
  • Every charitable trust or institution registered u/s 80G shall be required to submit a statement of donations received in such form & manner as may be prescribed & the benefit of 80G shall be available to donors on the basis of information relating to donation furnished by the corresponding charitable trust or institution.
  • Tax deductions under Section 80G will not be available to donors (individuals or companies) who opt for reduced rate of tax.

 

 

Comparison table of current Scenario Vs New Scenario for Exemptions under Section 80G and Section 12A

Current Scenario  

New Scenario  

New updates as on 8th may

Impact  

NGOs have the benefit of applying for exemption from Tax on Income u/s 12AA of the Income Tax Act. Once they receive such exemption, NGOs can also apply for 80G benefit, donations made to such NGOs would qualify for exemption u/s 80G of the IT Act for the donor.As of now, once a NGO (whether a Trust, Society or Association) registered itself u/s 12A and got exemptions u/s 12AA and 80G, these benefits were available on a continuous basis.   

All NGOs presently having exemption u/s 12AA of the IT Act shall have to reapply for the same by Aug 31, 2020.

All NGOs presently having exemption u/s 12AA of the IT Act shall have to re-apply for the same by March 31, 2020 and shall have to obtain new registration u/s 12AB.

Burden on presently exempted NGOs to reaffirm their activities and credentials to the satisfaction of IT authorities.

Exemptions once given are valid for the lifetime, until and unless the department specifically feels the need to review it.   

Once awarded the exemption shall be valid for the period of 5 years only, after which the NGO shall have to re-apply for exemption.

Same

NGOs shall have to provide evidence to and convince Income Tax authorities of the bonafides of their activities every 5 years, in order to retain their tax exemption.

Newly registered NGOs enjoy the benefit of exemption u/s 12AA on a continuous basis.  

Newly registered NGOs getting exemption u/s 12AA for the first time shall have    to renew/ reapply for the same after 3 years and thereafter every 5 years.

Same

Consistency of activities and bona fides have to be proven by new NGOs sooner than existing ones.

Donor wise details required only for overseas contributions/ donations   

Donor-wise details to be maintained and all donors will     have to be given a certificate.

Same

Additional Administrative and Reporting burden on NGOs

Delays in filing of returns governed by Sec 234 A, Sec 234 B and Sec 234 C   

It is proposed to levy a fee of Rs 200 per day for delay in filing prescribed returns u/s 234G plus a penalty of not less than Rs 10,000 and a maximum of Rs 100,000.

Same

Additional burden on NGOs in case of delayed filing of returns.

80G benefits available to donors for exempt NGOs on a stable basis  

80G donations now exposed to uncertainty.

Same

Many donors could shy away in view of this risk and donors may demand more information and transparency on end use of funds.

FCRA registration stable and independent of Sec 12A registration.   

Losing Sec 12 AA benefits would imply losing FCRA registration.

Same

NGOs dependent on overseas funds are exposed to a higher risk.

Tax deductions under Section 80G is available to donors under current rate of tax. 

Tax deductions under Section 80G will not be available to donors who opt for reduced rate of tax. (individuals or companies).

Same 

Taxpayers will have to forgo the tax exemption benefit if they opt for reduced rate of tax


Additional Consequences

  • There will be introduction of new provision as Section 12AB.
  • Compliance will become more cumbersome and costlier for NGOs. 
  • A higher administrative burden for tax authorities.
  • Greater control and leverage to Government Authorities to monitor and control the activities of NGOs.

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17 thoughts on “Changes in Norms -Exemptions under Section 80G and 12A / 12AA”

  2. Dear Pavan,

    Thank you for your query.

    Yes the renewal date under Section 12AB and 80G has been extended to 1st April, 2021. Hence now all existing trust have to re-register themselves after 01.04.2021.

    Reply

  4. Hi Gopinath,

    Thank you for writing to us.

    Well, it generally take 6 months for Section 12AA and 80G registration processing. However, in your case since you applied in the month of september, 2020, due to COVID 19, the time for processing may get longer.

    Also, you may raise the iquiry about the same in the department.

    In case, you require more information, you may write to us at info@ebizfiling.com, our Team will get in touch with you soon.

    Reply

  5. Hi Ramakant,

    Thank you for writing to us. As per recent update you will have to re-register yourself after 31st under section 80-G beacuase you registered on 4th of October, 2020 that is before the new provisions rolled out.

    For more queries kindly mail us at info@ebizfiling.com or call on +919643203209.

    Reply

  8. Hi Anupama,

    Yes, as per the new amendments, it is mandatory to re-register the trust under section 12AA and 80G(5) both. There is no separate form for this. You can apply in form 10A itself. If you read instruction given in the form 10A, it is clearly mentioned there that for renewal / re-registration under section 12AA and 80G(5), the application needs to be made in form 10A only.

    Reply

  10. can a New Trust who formed after 31st March’2022 is illegible to apply for 12A & 80G provisional approval

    Reply

    1. Yes, a trust formed after 31st March, 2022 is eligible to apply for Section 12A & 80G Provisional Approval under Income Tax Act. In case you have more queries or wish to register your trust under section 12A & 80G you may get in touch with team Ebizfiling on +919643203209 / info@ebizfiling.com

      Reply

  11. We have filed form 10A for re-validation of 12AA registration before 31st March 2022. However since we never knew that same form can be filed twice, Form 10A for 80G re-validation is not filed. Now there is no option on the income tax website to file for A.Y. 2022-23. We need to file statement of Donation but do not have UTR for 80G revalidation. What remedy is available with us.

    Reply

    1. Hi Pratik,

      Here, the only option left for you is to apply for 80G by filing a new Form 10A, and after getting provisional certificate only Form 10BD for Donation certificate can be filled.

      For further assistance, you may get in touch with our team on +919643203209 or drop your detailed inquiry at info@ebizfiling.com. Team Ebizfiling would be happy to help you.

      Reply

  12. Hello ma’am,

    You will have to make a new application for 12A Registration as the provisional certificate’s validity is only for 3 years. Contact us at +919643203209 / mail us at info@ebizfiling.com, if you need any additional information or assistance.

    Thank you for the query.

    Reply
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