12AA is a onetime registration done with the aim to receive exemption from Income Tax. All income of the organization cannot be taxed once this registration is done. Form 10A is used to fill the application form for 12AA registration.
Commissioner of Income tax department who holds the jurisdiction over the institution is responsible to process your application of registration under section 12AA. This application can take for about 3 to 4 months.
Organizations such as Charitable Trusts, Religious Trusts, Societies and Section 8 Companies are eligible to apply for Section 12AA registration. 12AA registration procedure along with Form 10A filing has been made online and can only be made possible with the digital signature of the signatory.
EXEMPTION PROVISIONS FOR A CHARITABLE TRUST
Trusts and Institutions established for Charitable and religious purposes are entitled for exemptions from Income Tax as specified in act. The eligible trust is required to make an application for grant of exemption u/s 12AA and 80G of Income Tax Act, 1961.
Benefits of 12AA Registration
- The fund which you are planning to use for the charitable or religious purpose will be regarded as Income Application. (Income Application is considered as an expense which is incurred by the trust on charity or on religious purpose)
- The final income received will be exempted from tax.
- Organization or person who is registered under this section can take the advantage of accumulation of income which cannot exceed 15% for the charitable or religious purposes.
- Section 11(2) consider accumulation of income as application of income hence it is not included in the total income.
- NGOs enjoy the benefit of receiving multiple permits from government and other agencies. There are agencies that provide financial support to NGOs and these agencies usually prefer to make grant to 12AA registered NGO’s.
- Once the registration is done, it remains valid till the date of cancellation of the registration.
- 12AA registration does not need to be renewed hence it can be considered as a benefit avail by the NGOs.
Eligibility Criteria for obtaining 12AA Registration
- One of the primary criteria to receive registration under Section 12AA is that the purpose behind the existence of the organization is to do charitable job as defined in the Income Tax Act.
- Before giving any registration certificate, governmental authorities will check whether there is any profit motive involved in conducting the activities.
- If the assesse is involved in activities like trade or commerce, then the services offered under this section remains limited. In such cases, registration is granted only to those applicants whose receipts from the trade activity are less than twenty percent of the total receipts of the assesse.
- Private or Family Trust are not eligible to apply for Section 12AA registration.
12AA registration applicant needs to submit the following documents along with Form 10A:
- Self-certified copy of document which was used in the process of creating trust or establishing the institution.
- A self-attested copy of the document confirming the creation of the trust, or foundation of the institution.
- A self-attested copy of the registration, which was made with the pertinent body. (Registrar of Companies, the Registrar of Firms and Societies or Registrar of Public Trusts)
- A self-certified copy of the document which serves as an evidence at the time of adoption or during alteration of the objective of the entity.
- Financial report of the trust/institution for maximum three preceding financial year.
- Note on activities which entity perform
Registration Procedure for Obtaining 12AA Registration
- Filling of Form 10A with the relevant details available and submitting the same.
- Once application is submitted, the Commissioner will ask to submit additional documents as per the additional requirements. This helps in proving the genuineness of the activities of the organization.
- If the Commissioner is clarified with the application, then he/she will provide registration under Section 12AA.
- The provision of Section 12AA(2) states that registering authority shall pass the order of granting or refusing registration before the expiry of six months from the end of the month in which the application was received.