If a benevolent or spiritual trust wishes to avail tax exemption on its earnings, it must register under Section 12AA of the Income Tax Act, 1961. Registration under this section is crucial to receive tax benefits as per Section 80G of the Income Tax Act. Here is a stepwise guide on how to register under Section 12AA:
Step 1: Obtain the Required Papers
Initially, the trust must procure the subsequent papers before filing for registration:
Trust Deed: A photocopy of the trust deed, which must be duly executed on non-judicial stamp paper and registered with the sub-registrar’s office.
PAN Card: A photocopy of the trust’s PAN card.
Address Proof: A photocopy of the address proof of the trust’s registered office, such as electricity bill, water bill, or property tax receipt.
Accounts: A photocopy of the trust’s audited financial statements for the last three years.
Step 2: Submit the Registration Application
After acquiring the essential papers, the trust must file an application for registration in Form 10A with the Commissioner of Income Tax (Exemptions) in the area where the trust is based. The application should consist of the following:
Photocopies of the trust deed, PAN card, address proof, and audited financial statements.
A report on the trust’s activities since its inception or for the previous three years, whichever is less.
A brief on the charitable activities of the trust.
A photocopy of the resolution of the trust’s governing body authorizing the submission of the application.
A photocopy of the order granting registration under the Societies Registration Act, 1860, or the Indian Trusts Act, 1882, if any.
Step 3: Verification by the Commissioner of Income Tax
After receiving the application, the Commissioner of Income Tax (Exemptions) will verify the information and may ask for additional information or papers. The Commissioner may also perform a physical inspection of the registered office of the trust.
Step 4: Registration Approval
If the Commissioner is content with the application and supporting documents, the Commissioner will approve registration under Section 12AA for the trust. The registration will be valid from the date of the trust’s inception or from the date of the application, whichever is later.
If the Commissioner is not satisfied with the application or if inconsistencies are discovered during the verification process, the Commissioner may reject the application and notify the trust of the reasons for the rejection.
Conclusion
Registration under Section 12AA is crucial for any benevolent or spiritual trust seeking tax exemption on its income. The process is uncomplicated but necessitates the trust to procure the essential documents and submit an application with the Commissioner of Income Tax (Exemptions). Once registered, the trust can enjoy tax benefits under Section 80G of the Income Tax Act, which can facilitate its charitable or spiritual pursuits.
section 12AA of Income Tax Act, 1961
(1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall—
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,—
(i) the genuineness of activities of the trust or institution; and
(ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects,
and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, he—
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,
and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A.
(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.
(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that—
(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or
(b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality,
then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:
Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.
91-92[(5) Nothing contained in this section shall apply on or after the 1st day of April, 2021.]
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