NPO – Not for profit organization
As we all know from 01.04.2021, there has been drastic change made in registration norms of NPO, which requires all NPOs to get registered under Section 12A & 80G of Income Tax Act, 1961. Prior to 31.03.2021, once registered under Section 12A & 80G of Income Tax Act, the registration would be valid for lifetime until the same is specifically cancelled by Income Tax department. From 01.04.2021, this norm is changed and now the registration is granted for a limited period and is required to be renewed on regular basis.
Process for NPOs already registered under 12A & 80G before amendment:
As per new provisions, all existing NPOs which were registered under Section 01-Sub clause (i) of clause (ac) of sub -section (1) of section 12A & 11-Clause (i) of first proviso to sub-section (5) of section 80G prior to 31.03.2021, are required to apply for registration on or before 31.03.2022* in Form 10A.
These amendments were originally introduced by the Finance Act, 2020 effective from 1St June 2020, However, due to unprecedented economic crisis, the government passed “The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020” as on 29th September 2020 to defer the implementation of new procedure and make it effective from 1st April 2021
(*The original due date was 30.06.2021 and is being extended from time to time, the latest due date being 31.03.2022).
Process for NPOs applying for first time for registration 12A & 80G after the amendment:
A NPO can apply for registration under 12A and 80G. Such organizations will be granted “provisional registration”. The validity period of provisional registration is 3 years; however, NPO is required to apply for Final registration in Form 10AB under Section 12A & 80G of Income Tax Act, 1961 at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier.
Illustration: As on 1St April 2021 Trust provisionally Registered under Section 12AB. Validity of Provisional Registration Certificate 3 Years i.e till 1St April 2024
Scenario 1: NPO Activities commences as on 1St April 2021 in that scenario Time limit for making application for registration u/s 12AB in Form 10AB shall be within 6 months of commencement of activities. i.e., till 30th September 2021
Scenario 2: If Activity Commences as on 1St April 2024 in that scenario Time limit for making application for registration u/s 12AB in Form 10AB shall be at least six months prior to expiry of the period of the provisional approval. i.e., Till 30th September 2023 From above it is clear that, all existing NPOs or newly formed NPO must apply for Final Registration under Section 12A & 80G in Form 10AB within six months of commencement of its activities. When we apply for Final registration under Form 10AB, and it is approved by proper officer then it is valid for 5 years. Now, we will discuss about the documents required for Filing application in Form 10AB
As per rule 11AA, following documents are required to be attached while Filing application in Form 10 AB :-
SN | Particulars | For Example |
1 | copy of the instrument creating the trust or establishing the institution | scan copy ofTrust Deed/ Memorandum of association/ scan copy ofByelaws/ Rules & Regulations/ Articles of association |
2 | copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be; | scan copy of Registration certificate under societies Act / Bombay public Trust Act / Registrar of companies |
3 | copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act | scan copy of Registration certificate under Foreign Contribution (Regulation) Act, 2010 (42 of 2010) |
4 | copy of existing order granting registration under section 12A or section 12AA or section 12AB or clause (23C) of section 10 or section 80G | scan copy of existing order granting registration under section 12A or section 12AA or section 12AB or clause (23C) of section 10 or section 80G |
5 | copy of order of rejection of application for grant of registration under section 12A or section 12AA or section 12AB or clause (23C) of section 10 or section 80G, as the case may be | scan copy of rejection of application under section 12A or section 12AA or section 12AB or clause (23C) of section 10 or section 80G |
6 | Where the trust or fund or the institution held by the applicant as per the provisions of sub-section (4) of section 11 has been in existence during any year or years prior to the financial year in which the application for registration is made, Self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period in case where section code is other than 13 or 14 in row number 2 | Self-certified scan copy of last three years’ financial statement (for FY 18-19, FY 19-20 & FY 20-21) it should include:ITR Acknowledgement, Form 10B and its Acknowledgement, Balance sheet with relevant schedules & Notes to Accounts, Income and Expenditure/ Profit and Loss Account, Receipt and Payment Account, Auditors Report |
7 | Any Other | Note on Activities carried out by NPO, PAN and Aadhar of Members of NPO, etc |
All the above Documents should be Self-Certify
Note - How to Self-Certify documents?
You may put “self-Certified” and the president or secretary may sign with his/her name. In case of document having multiple pages, you may sign the first and last page in above manner. For example, in case of a trust deed of several pages, you may self-certify the first and last page.
Additional requirement:
Digital signature might be required for filing of application in case the income tax portal’s EVC facility is non-functional or not available for any reason.
Additional Detail to be Provided in Form 10AB which are not required to be reported at time of Provisional Registration in Form 10 A :-
> Details of School/ Institutions/ religious places which are being managed/ controlled/ administered/ owned by NPO
> If NPO is doing any business activity, then business code of that activity needs to provide
>Details of all bank accounts in the name of NPO, needs to provide
> Details of all land or building or both held by the applicant
> Details of expenditure incurred on religious activities (If any) After receipt of information, the proper officer will verify the details and after satisfaction will issue Final registration certificate which have 5 Years validity
Consequences of Not Filing Form 10 AB:
Existing Trust registered u/s 12AB of the Income Tax Act who wishes to claim exemption u/s 11 and u/s 12 are mandatorily required to obtain registration under the Income Tax Act in by filing Form No. 10AB.
The registration is granted subject to the following conditions: -
A registration certificate is issued with a set of conditions. These include:
(a) As and when there is a move to amend or alter the objects/rules and regulations of the applicant, prior approval of the Commissioner of Income Tax shall be sought along with the draft of the amended deed and no such amendment shall be effected
until and unless the approval is accorded.
(b) In the event of dissolution, surplus and assets shall be given to an organization, which has similar objects and no part of the same will go directly or indirectly to anybody specified in section 13(3) of the Income Tax Act, 1961.
(c) In case the trust/institution is converted into any form, merged into any other entity, or dissolved in any previous year in terms of provisions of section 115TD, the applicant shall be liable to pay tax and interest in respect of accreted income within
specified time as per provisions of section 115TD to 115TF of the Income Tax Act,1961 unless the application for fresh registration under section 12AB for the said previous year is granted by the Commissioner.
(d) The Trust/ Institution should quote the PAN in all its communications with the
Department.
(e)The registration u/s 12AB of the Income Tax Act, 1961 does not automatically confer any right on the donors to claim deduction u/s 80G.
(f)Order u/s 12AB read with section 12A does not confer any right of exemption upon the applicant u/s 11 and 12 of Income Tax Act, 1961. Such exemption from taxation will be available only after the Assessing Officer is satisfied about the genuineness of the activities promised or claimed to be carried on in each Financial Year relevant to the Assessment Year and all the provisions of law acted upon. This will be further subject to provisions of section 2(15) of the Income Tax Act, 1961.
(g) No change in terms of Trust Deed/ Memorandum of Association shall be affected without due procedure of law and its intimation shall be given immediately to Office of the Jurisdictional Commissioner of Income Tax. The registering authority reserves the right to consider whether any such alteration in objects would be consistent with the definition of "charitable purpose" under the Act and in conformity with the requirement of continuity of registration.
(h) The Trust/ Society/ Non-Profit Company shall maintain accounts regularly and shall get these accounts audited in accordance with the provisions of the section 12A(1)(b) of the Income Tax Act, 1961. Separate accounts in respect of each activity as specified in Trust Deed/ Memorandum of Association shall be maintained. A copy of such account shall be submitted to the Assessing Officer. A public notice of the activities carried on/ to be carried on and the target group(s) (intended beneficiaries) shall be duly displayed at the Registered/ Designated Office of the Organisation.
(i) The Trust/ Institution shall furnish a return of income every year within the time limit prescribed under the Income Tax Act, 1961.
(j) Separate accounts in respect of profits and gains of business incidental to attainment of objects shall be maintained in compliance to section 11(4A) of Income Tax Act, 1961.
(k) The registered office or the principal place of activity of the applicant should not be transferred outside the jurisdiction of Jurisdictional Commissioner of Income Tax except with the prior approval.
(l) No asset shall be transferred without the knowledge of Jurisdictional Commissioner of Income Tax to anyone, including to any Trust/ Society/ Non-Profit Company etc.
(m) The registration so granted is liable to be cancelled at any point of time if the registering authority is satisfied that activities of the Trust/ Institution/ Non-Profit Company is not genuine or are not being carried out in accordance with the objects of the Trust/ Institution/ Non-Profit Company.
(n) If it is found later that the registration has been obtained fraudulently by misrepresentation or suppression of any fact, the registration so granted is liable to be cancelled as per the provision u/s section 12AB (4) of the Act.
(o) This certificate cannot be used as a basis for claiming non-deduction of tax at source in respect of investments etc. relating to the Trust/ Institution.
(p) All the Public Money so received including for Corpus or any contribution shall be routed through a Bank Account whose number shall be communicated to Office of the Jurisdictional Commissioner of Income Tax.
(q) The applicant shall comply with the provisions of the Income Tax Act, 1961 read with the Income Tax Rules, 1962.
(r) The registration and the Unique registration number has been instantly granted and if, at any point of time, it is noticed that form for registration has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) of rule 17A or by not complying with the requirements of sub- rule (3) or (4) of the said rule, the registration and Unique Registration Number (URN), shall be cancelled and the registration and URN shall be deemed to have never been granted or issued.
Besides compliance with provisions of income tax act 1961 are applicable, especially conditions specified in Section 11 and 12.
Feel free to reach us for more discussion on the topic.
Compiled by - Tanmay Maratkar