The Income Tax Department offers tax exemptions for non-profit organisations such as religious institutions, NGOs, welfare societies and charitable trusts u/s 12A. This tax benefit supports those organisations that work towards social wellbeing and bring about economic improvement.
An entity needs to register under Section 12A of the Income Tax Act to avail of tax exemption. If a non-profit institution doesn’t register u/s 12A, its financial receipts will be taxable. So, organisations engaged in selfless contributions must get an insight into this provision.
Keep reading this page to know how Section 12A works!
As per the IT Act, 1961, the following institutions are eligible to enrol under this section:
Family-owned or private charities and trusts cannot avail of the exemptions u/s 12A.
Trusts and entities who wish to claim this tax benefit must file Form 10A through the online mode. The Income Tax Department requires the digital signature of the applicants. However, taxpayers can also access this form via an electronic verification code online.
You can file Form 10A in the following manner:
Besides filing Form 10A for exemption under Section 12A of the Income Tax Act, a taxpayer needs to get the application verified by the commissioner. Assessees must submit the required documents to finish this procedure.
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Firms, trusts and societies need to furnish the following documents:
Now, you already know about the documents and eligibility requirements to get tax benefits under Section 12A of the Income Tax Act. Let’s find out how to register!
You can register u/s 12A in the following manner:
If your details do not satisfy the commissioner, he/she may refuse the registration in writing. The registration process usually gets completed within one to three months. As per Section 12AA(2), both acceptance and rejection notices must be issued before the completion of six months (calculated from the end of the month in which the application was submitted).
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Section 12A of the Income Tax Act offers the following vital amendments:
There exist certain guidelines for the entities considered u/s 12A. These are as follows:
Section 12A of the Income Tax Act allows non-profit institutions to reduce their income tax liability. All the registered entities must continue with their noble initiatives to get aid from the Central Government.
Ans: Yes, the Income Tax Act offers lifetime validity to the organisations registered u/s 12A. There is no need for renewal as long as an entity is in business. However, the commissioner may disapprove of the registration under special cases.
Ans: Section 12A contains the applications of Section 12 and Section 11, while Section 12AA gives an insight into Section 12A registration procedure. The combined benefits of these two provisions are as follows:
Earnings get tax exemption
Facilitates FCRA registration
Organisations registered u/s 15A can get tax benefits on earnings of up to 15% for charitable or religious purposes.
Prioritisation of grants from international or government agencies
Expenditure for religious and charitable purposes will be eligible for tax exemption
Ans: Yes, organisations can apply for both Section 80G and Section 12A together, or they can do so separately. If an entity wants a separate application, it should apply for Section 12A first. Enrolment u/s 12A is a vital factor for getting registered u/s 80G.
Ans: The commission can reject registration under the following circumstances:
Trust isn’t a religious or public charitable trust
A trust’s objects are not for charitable purposes
Certain objects benefit trustees, settlers or their family members
A provision for transferring a portion of the assets or earnings of a trust to a private entity is there
A trust’s goal is to benefit a particular individual, caste or religious community rather than the public in general
Ans: Section 80G of the IT Act includes contributions to specific charitable entities and relief funds. Such donations are eligible for tax deductions. The following taxpayers can avail this benefit:
Before you go…
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.