Section 12A of Income Tax Act

Section 12A of the Income Tax Act pertains to the registration and conditions for charitable trusts and institutions avail of the tax exemption. This provision allows such entities to register themselves with the Income Tax Department to claim tax benefits.

To qualify for registration under Section 12A, organisations must adhere to certain conditions, including operating exclusively for charitable or religious purposes, ensuring that their income is applied towards these objectives, and maintaining proper records of their activities and finances.

Once registered, these entities become eligible for tax exemption, thereby encouraging philanthropic endeavours and promoting social welfare initiatives.

This provision plays a crucial role in incentivising and regulating the activities of charitable organisations, fostering a culture of giving and social responsibility within the framework of the tax laws.

• The organisation must fulfil the Income Tax Act's definition of a charity purpose in order to be eligible for registration under Section 12A. Activities aimed at protecting the environment, aiding the underprivileged, providing education, and providing medical care are all considered charitable purposes. A public utility's pursuit of any other goal is equally acceptable as a charity purpose.

• The major qualifying criterion will be whether the assessee's activities entail a profit motive. Registration must be issued unless there is a profit motive.

• The facility provided by this section is limited if the assessee is engaged in trade or commerce-related activities. In these situations, registration is only approved if the trading activity's revenues account for less than 20% of the assessee's overall revenues.

• Private or family-owned trusts and charities are exempt from this Act.

• Organisations and trusts that satisfy the conditions to register under Section 12A of the Income Tax Act must submit Form 10A online.

These - Steps make it simple to file Form 10A online:

• Step 1: Access the e-filing portal of the Income Tax Department.

• Step 2: Login by using your credentials, such as your ID and password

• Step 3: Click the "e-file" tab and choose "Income Tax Forms" from the menu below.

• Step 4: Choose Form 10A from the "Form Name" field.

• Step 5: Choose the appropriate "Submission Year" and "Assessment Year."

• Step 6: Fill in the necessary information and double-check it.

• Step 7: Select the "Submit" option

Note:** It is important to remember that merely submitting Form 10A does not ensure registration under the Section 12A of the Income Tax Act. The Commissioner must verify the application. The Commissioner must verify the application, and applicants must submit the necessary documents to complete the verification procedure.

• A document proving the establishment of an institution or the trust.

• Registration with the RoC

• Documents that prove the adoption or alteration of things.

• Annual financial reports for trusts or entities.

• An existing order providing authorisation to register under Section 12A or Section 12AA.

• A list highlighting the trust or institution's activities.

• An order rejecting the application for registration under either Section 12A or the Section 12A.

• The assessee must apply in the relevant format online. After the application is submitted, the Commissioner may request that the applicant provide additional information or documents as needed.

• If the Commissioner is satisfied with the application, they may issue a written decision indicating that the assessee is eligible for registration under the section. The written order goes to the assessee. Following receipt of the order, the assessee may get the right of registration under the section.

• If the commissioner is not pleased with the application, the application can be rejected. The assessee is informed in writing about the basis for the denial.

• It is also important to understand that once a trust is registered, it has lifetime validity, making 12A registrations a one-time process. However, in extraordinary cases, the commissioner may cancel it.

Section 12A pertains to the initial registration process for entities desiring tax exemption under specific categories, such as charitable or religious institutions. The Income Tax Department recognizes these entities and allows them to claim tax benefits.

On the other hand, section 12AA of the Income Tax Act addresses the subsequent stage, where the tax department evaluates the organisation’s activities and objectives to ensure they align with the provisions for tax exemption.

Essentially, while section 12A facilitates registration, section 12AA validates and confirms the eligibility of the organisation for continued tax exemption status based on its operations and compliance with relevant regulations.

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