In India, charitable institutions and associations enjoy specific tax exemptions and benefits. These privileges fall under Section 12AA/12A and 80G of the IT Act, 1961. However, there’s been a change requiring these entities to undergo revalidation for their registrations to continue benefiting from Sections 12A and 80G registration.
Without this revalidation, charitable institutions cannot claim the tax benefits provided by these sections. The revalidation process primarily assesses whether the charitable activities conducted by the Trusts, NGOs, or institutions are authentic.
The significance of revalidating 80G and 12A stems from amendments made in the Finance Act of 2020. This amendment mandates that charitable institutions registered under Section 12A/12AA and/or 80G of the IT Act, 1961 must reapply for their registrations. The IT (6th Amendment) Rules, 2021, implementing this change, came into effect on April 1, 2021. In this blog, we shall see the revalidation of 80G and 12A registrations.
Understanding Section 12A and Section 80G of the IT Act, 1961
Before going into revalidation of 80G and 12A, let us first understand their meanings.
Section 80G of IT Act
Section 80G of the Income Tax Act, 1961, mainly deals with the registration of trusts and charitable institutions. It’s crucial to understand that this section doesn’t directly offer benefits to these organisations. Instead, it functions as a mechanism that allows donors who make contributions to them to access specific tax benefits related to their donations. Charitable institutions and trusts voluntarily register themselves under Section 80G to incentivise their donors to make contributions.
Section 12A of IT Act
Section 12A of the Income Tax Act, 1961, is concerned with the registration of institutions or trusts and signifies that tax authorities acknowledge these entities as having been set up for charitable objectives.The consequence of such recognition is that these registered institutions become exempt from paying income tax, provided they fulfil certain compliance requirements stipulated by the law.
Distinction Between Section 12A and Section 12AA
It’s essential to differentiate between these sections based on the year of incorporation:
– Section 12A deals with institutions and trusts incorporated before 1996.
– Section 12AA addresses trusts and charitable institutions registered after 1996.
Regardless of whether an NGO is constituted as a trust, society, or not-for-profit company, obtaining a 12A certification is crucial for them to qualify for tax benefits. This certification underscores their commitment to charitable activities and paves the way for tax relief for both the organisation and its donors.
Understanding Revalidation Of 80G And 12A Registration
If your organisation is an NGO, Trust, or Section 8 Company benefiting from Section 80G and 12A Deductions, it’s imperative to undergo the process of revalidation of 80G and 12A registrations. To continue enjoying the advantages of the 12A Certificate for NGOs and 80G Deductions, you must submit an application to the IT authorities for the revalidation of your existing 12A and 80G registrations.
The need for revalidation of 80G and 12A arises from an amendment introduced by the Finance Act of 2020. This amendment has ushered in a new regulatory framework for various charitable entities, including trusts, institutions, hospitals, universities, and medical institutions, among others. This Act now mandates that all charitable institutions previously registered under Section 12A/12AA and/or 80G of the IT Act must reapply for their registrations under the revised provisions.
Features of Revalidation of 80G and 12A Registration
Revalidation of 80G and 12A registrations of the Income Tax Act, 1961, comes with several important features:
1. Simplified Revalidation Process:
- Entities already registered under Sections 12A and 80G can apply for revalidation.
- Detailed inquiries by the Commissioner of Income Tax (CIT) or Principal Commissioner of Income Tax (PCIT) may not be required.
- Upon receiving the revalidation application, the CIT or PCIT is expected to issue the registration order.
- Enquiries are typically necessary in two cases:
– After the expiration of the initial registration’s 5-year validity period.
– When converting provisional registration or approval into full registration.
2. Applicability to Section 12AA Covered Institutions:
- Revalidation of 80G and 12A Registration extends to institutions covered under both Section 12A and Section 12AA.
- Section 12A pertains to charitable trusts or institutions registered before 1996, while Section 12AA applies to those registered after 1996.
- The PCIT or CIT is mandated to issue an approval (or rejection) order for NGO registration within a three-month timeframe.
4. Application Accuracy Check:
- While detailed inquiries may not be a standard procedure, the applications for revalidation will undergo scrutiny for correctness and completeness.
- The authority will verify the Trust Deeds, Registration Certificates, donor lists, by-laws, and member lists to ensure they are valid and in the correct format.
These features reflect the streamlined process for revalidating registrations under Sections 80G and 12A, aiming to reduce administrative burdens while ensuring compliance with the relevant regulations and documentation standards.
Documents Required for Revalidation of 80G and 12A
When applying for the revalidation of 80G and 12A registrations under the Income Tax Act, 1961, the following documents are crucial:
1. Self-certified copy of FCRA Registration (if applicable):
– If the applicant or organisation is registered under the Foreign Contributions Regulation Act (FCRA) of 2010, a self-certified copy of this registration is required.
2. Existing Registration Order (Section 12A, 12AA, or 12AB):
– A copy of the current registration order under the relevant section (12A, 12AA, or 12AB) must be provided.
3. Documents Demonstrating Object Modification or Adoption:
– Copies of documents that clearly show or evidence any modifications or adoptions of the organisation’s objects are necessary.
4. NGO DARPAN Registration Details (if applicable):
– If the organisation is registered on the DARPAN portal, details of the NGO DARPAN registration should be provided.
5. Incorporation Documents (Societies or Trust):
– Copies of documents related to the incorporation of the organisation, whether it’s a society or trust, should be included.
6. Registration with Relevant Authorities:
– Copies of registrations with relevant authorities such as the Registrar of Companies (ROC), Registrar of Firms, Registrar of Societies, or Registrar of Public Trusts, as applicable, must be provided.
7. Annual Accounts (for Existing Entities):
– Copies of annual accounts for a period not exceeding three years immediately prior to the year in which the revalidation application is made are required for existing entities.
8. Income Comprising Business Profits or Gains (if applicable):
– If the organisation’s income includes profits and gains from a business or if a business undertaking is held by the organisation under the provisions of Section 11(4A), copies of annual accounts and audit reports under Section 44AB for three years immediately prior to the application year are necessary.
9. Notes on Institution/Trust’s Activities:
– Comprehensive notes detailing the activities, objectives, and operations of the institution or trust should be included in the application.
These documents serve as essential evidence to support the revalidation of 80G and 12A and ensure compliance with the Income Tax Act’s requirements. Applicants should provide complete and accurate documentation to facilitate the revalidation process.
Procedure for Revalidation of 80G and 12A Registrations
To seek exemption under Sections 80G and 12A of the Income Tax Act, NGOs, charitable, or religious trusts need to follow a specific procedure for revalidation of 80G and 12A. Here are the steps involved:
1. Access the Online IT Department Portal:
– Begin by logging in to the official website of the Income Tax Department.
2. Navigate to Income Tax Forms:
– Once logged in, locate the section for Income Tax Forms. This can typically be found in the “e-file” or a similar tab on the website.
3. Select Form 10A:
– In the Income Tax Forms section, choose the relevant form, which is Form 10A for the purpose of revalidation.
4. Choose Assessment Year:
– Select the appropriate Assessment Year from the provided drop-down list. Ensure that you choose the correct year for your revalidation application.
5. Select Submission Mode:
– Opt for the “Prepare & Submit Online” option as your submission mode. This will allow you to fill out the form electronically.
6. Complete the Form:
– Fill in all the necessary information and details required in Form 10A. Ensure accuracy and completeness in providing the required data.
7. Attach Relevant Documents:
– Attach the necessary documents and attachments as specified in the form and the application guidelines.
8. Submit the Form:
– After completing the form and attaching the required documents, submit it through the online portal.
9. Electronic Verification or Digital Signature:
– Depending on the requirements at the time of filing, you may need to use either an Electronic Verification Code or a Digital Signature Certificate to authenticate and submit the application.
Final Thoughts
The revalidation of 80G and 12A registrations under the Income Tax Act, 1961, is a vital administrative procedure for NGOs, charitable trusts, and religious organisations. It allows these entities to maintain their eligibility for tax exemptions and benefits. This procedure involves logging into the Income Tax Department’s online portal, selecting Form 10A, and submitting the relevant details and documents electronically.
Accuracy and completeness in application submissions are critical to ensure a successful revalidation. By adhering to this process, organisations can continue their noble work while also enjoying the tax advantages intended to incentivise and support their charitable and philanthropic endeavours.
