The Income Tax Department offers tax exemptions for non-profit organisations such as religious institutions, NGOs, welfare societies and charitable trusts under section 12A of the income tax act. 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 of the income tax act 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 under section 12A.
Here are some benefits that NGOs, charitable and religious organisations may receive if they register u/s 12A of the IT Act:
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.
Also Read: Income Tax Return And Its Types
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!
Form 10A is applicable for religious or charitable organisations who wish to get registered under section 12A of the Income Tax Act and claim exemptions under Sections 11 and 12. It is a mandatory form for registering under section 12A.
This form contains all necessary details about the organisation opting for registration under section 12A. It contains all incorporation and operating details of the organisations, acting as an important repository of data about them. Form 10A must be submitted using a Digital Signature certificate thus ensuring the authenticity of the information provided.
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).
Also Read: Dividend Distribution Tax
As per the Income Tax Act, all non-profit organisations including religious or charitable trusts must register under section 12A in order to receive tax exemptions or deductions. On the other hand, section 12AA enumerates or describes the process of registration under section 12A. It deals with the method and timeline of the registration process.
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:
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
What is Form 26QB for TDS? How to Download and Submit it?While purchasing a property, buyers are liable to pay various taxes. The Finance Act, 2013 made TDS... Read More »
PF Withdrawal Rules 2023 – Rules, Documents Required and TypesEPF/PF Withdrawal Employees’ Provident Fund (abbreviated as EPF) is a popular retirement sav... Read More »
Stamp Duty and Property Registration Charges in Delhi 2023It is compulsory for property buyers in the Capital to pay stamp duty in Delhi during property regi... Read More »
Income Tax Return – Documents, Forms and How to File ITR Online AY 2023-24In India, it is mandatory for all taxpayers who earn more than the basic tax exemption limit to fil... Read More »
What is Section 80CCD – Deductions for National Pension Scheme and Atal Pension YojanaThe Income Tax Act provides a number of deductions and tax benefits to taxpayers, so they can strat... Read More »
Tax on Dividend Income: Sources, Tax Rate and TDS on dividend incomeWhat are Dividends? Companies may raise funds for running their operations by selling equity. Th... Read More »
Section 112A of Income Tax Act: Taxation on Long-Term Capital GainsWhat is Section 112A? Section 112A of the Income Tax Act was announced in Budget 2018 to replace... Read More »
Section 206AB of Income Tax Act: Eligibility And TDS RateSection 206AB was introduced in the Finance Bill 2021 as a new provision pertaining to higher deduc... Read More »
What is a Credit Note in GST – Example, Format and StepsA GST Credit Note is mandatory for any GST-registered supplier of goods or services. As a supplier,... Read More »
Exemptions and Deductions Under Section 10 of Income Tax ActWhat Is Section 10 of the Income Tax Act? Section 10 of the Income Tax Act, 1961 provides tax-sa... Read More »
Section 57 of the Income-tax Act – Income from Other SourcesIt is quite likely that many entities - individuals as well as businesses - have multiple sources o... Read More »