Our expert professionals are providing services for Registration under section 12A and Approval under Section 80-G of Income tax Act, 1961 in the case of Charitable Organisations.
Registration Procedure u/s 12 A
Application for Registration under Section 12 A
Time Limit for Making Application under Section 12 A
Authority to Whom Application under section 12 A is to be made
Time Limit for Passing the Order
If No order is passed within the time Limit
Can Registration once Granted be cancelled
Registration of NGOs of National Importance
Approval under Section 80-G, Income Tax
Documents to be Filed with form 10-G
Conditions to be fulfilled under Section 80-G
Extent of Benefit
Registration Procedure u/s 12
A
Income tax was first introduced in India in 1860. In those days income
related with charitable purposes were totally exempt from tax. Over the
years the Income Tax Act underwent radical changes, basically to ensure
that such exemptions are not misused by unscrupulous elements. Currently
extensive exemptions are still available to NGOs but a host of
regulatory provisions have been incorporated in the act, which are to be
adhered to, in order to claim exemptions.
Application
for Registration under Section 12 A
In order to claim exemption, an NGO should make an application to the
Commissioner of Income Tax for registration of the NGO. Such application
is to be made in Form 10A. The following documents are required to be
submitted :
i) Form 10A
ii) The original instrument under which the NGO is established, or the
Bye Laws & Memorandum of Association evidencing the creation of the NGO
should be enclosed.
iii) Two copies of the Accounts of 3 previous years should be enclosed.
Where the NGO was not in existence in any of three prior years, copies
of the accounts of lesser No. of years may be submitted.
Time
Limit for Making Application under Section 12 A
Provisions prior to 1st June 2007
Prior to the changes made by Finance Act 2007, the application for
registration by an organization should have been made before expiry of
one year from the date of creation of an organization. Organisation
which made delayed application was allowed exemption with effect from
the 1st day of the previous year in which application is made. The
Commissioner of Income Tax had power to condone the delay in filing
application.
Provisions after to 1st June 2007
The above provisions were amended by the Finance Act 2007. According
to the amendment, the power of the Commissioner of Income Tax (CIT) to
condone the delay has been withdrawn w.e.f. 1st June 2007.
Implications of the above amendment
Any delay in the filing of application for registration by the
organisations cannot be condoned by the CIT. The exemption shall be
given from the 1st day of the previous year in which the application was
made and if the organisation has any income in the previous years prior
to filing the application, shall be subject to tax. Thus the onus of
availing exemption of Income from the Income Tax Department lies on the
organisation itself.
Authority to Whom Application under section 12 A is to be made
The application is to be submitted Income Tax - Registration Procedure
to the Commissioner of Income Tax in whose area the NGO is located.
However, in respect of the four metropolitan cities of Calcutta,
Chennai, Delhi & Mumbai, the applications are to be made to the Director
of Income Tax (Exemption).
Granting and Refusal
The Commissioner of Income Tax, on receipt of an application for
registration of an NGO, shall call for such documents or information, as
he thinks necessary. While processing such application, the concerned
authority normally concentrates on the genuineness of the NGO. Once the
genuineness of the activities & creation is established, then it is
incumbent upon the authority to pass an order in writing, registering
the NGO.
Opportunity of being heard
The Commissioner of Income Tax has the power to reject an application
for registration. It may be noted that such powers cannot be used
arbitrarily without substantiating adequate reasons for such rejection.
Under the current laws it is statutorily required that, an opportunity
of being heard should be provided to the applicant, before rejection of
any application.
Appeal Against Rejection
Under the provisions of Section 253 of the Income Tax Act an appeal can
be made to the Income Tax Appellate Tribunal against an order rejecting
the application for registration. Under such circumstances if an NGO
sincerely believes that an unjust order has been awarded against it,
then it can file an appeal.
Time Limit for Passing the
Order
Under income tax laws the order for either granting or refusing
registration shall have to be passed within six months from the end of
the month in which the application was made.
If No order is
passed within the time Limit
Here it is worthwhile to note that, both FCRA and Income Tax laws in
India are vague and ambiguous in this regard. Ironically it has been
clearly mentioned in the Income Tax Act that an order has to be passed
within 6 months but nothing has been mentioned about the fate of the
application if it is not cleared within 6 months. Some sort of amendment
is required in this regard. A deeming provision for automatic
registration may not be a bad idea. Under FCRA Laws if an NGO applies
for prior permission to receive Foreign Funds and if the application is
not processed within 90 days, the application is deemed to have been
automatically granted. But as far as registration is concerned both
Income Tax Act & FCRA are silent.
Can Registration
once Granted be cancelled
The Finance Act, 2004 has inserted a new sub-section to section
12AA. By virtue of this newly inserted sub-section 3, the Commissioner
with effect from 1st day of October, 2004 shall have the power to cancel
the registration, if he or she is satisfied that the activities of such
trust/institution are not genuine or are not being carried out in
accordance with the objects of the Trust or Institution. Before such
cancellation, the Commissioner has to provide a reasonable opportunity
of being heard and an order in writing has to be passed for such
cancellation.
Condonation of Delay
The application for registration should be made within one year from the
date of creation of Trust. If application is filed after the period as
said, then the Chief Commissioner or Commissioner can condone the delay
after satisfying himself that sufficient reasons exist for delay. If
condonation of delay has not been granted by the Commissioner, then the
Trust or Institution would be eligible for exemption from the first day
of the financial year in which the application is filed.
The power empowering the authority concerned to condone the delay, in
case of Trust or Institution who makes an application before the expiry
of one year from the date of creation of the Trust or the establishment
of the Institution, whichever is later, still remains as it was before,
as such authority concerned have power under the circumstances to
condone the delay, after satisfying the reasons for delay and for
reasons recorded in writing.
Registration of
NGOs of National Importance
Government of India notifies few NGO's in the official gazette each
year. Such notified NGO's are totally exempted from tax even if they are
not registered under section 11 of the Income Tax Act. All NGO's are
open to apply for this recognition. Currently, the Central Government
has exempted various organizations including universities, sport
institutions, medical institutions, NGO's etc, under these provisions.
An NGO can apply for such exemptions under section 10(23)(c)(iv).
In order to claim exemption, an application in Form No. 56 is to be
submitted to the Director General (Income Tax Exemption), Calcutta
through the Commissioner of Income-Tax having jurisdiction over the
Trust or Institution in four copies along with the following documents :
a) copies of the Deed of Trust/Rules and Regulations/Memorandum and
Articles of Association ;
b) a List of Members of the Governing Council/Body ;
c) photocopies of the latest certificate under Section 80G issued by the
Commissioner of Income Tax, if applicable ;
d) photo-copies of the assessment orders passed for the last three year
(or to the extent applicable)
e) photocopy of communication from the Commissioner of Income Tax with
reference to the application of the Fund/Trust/Institution for
registration.
Approval under Section 80-G, Income Tax
Privileges to the Donors
As we know that an NGO can avail income tax exemption by getting
itself registered and complying with certain other formalities, but such
registration does not provide any benefit to the persons making
donations. The Income Tax Act has certain provisions which offer tax
benefits to the "donors". All NGO's should avail the advantage of these
provisions to attract potential donors. Section 80G is one of such
sections.
Registration Under Section 80-G
If an NGO gets itself registered under section 80G then the person
or the organisation making a donation to the NGO will get a deduction of
50% from his/its taxable income. The NGO has to apply in Form No. 10G to
the Commissioner of Income Tax for such registration.
The Finance Act, 2009, has deleted the five year restriction under
proviso to sub section (5) clause (vi). In other words, registration
certificates issued after 1st October, 2009 can be considered as one
time registration unless any specific restriction is provided in the
certification itself.
Documents to be Filed
with form 10-G
The application form should be sent in triplicate to the Commissioner of
Income Tax alongwith the following documents :
i) copy of income tax registration certificate.
ii) detail of activities since its inception or last three years
whichever is less
iii) copies of audited accounts of the institution/NGO since its
inception or last 3 years whichever is less.
Conditions to
be fulfilled under Section 80-G
For approval under section 80G the following conditions are to be
fulfilled :
i) the NGO should not have any income which are not exempted, such as
business income. If, the NGO has business income then it should maintain
separate books of accounts and should not divert donations received for
the purpose of such business.
ii) the bylaws or objectives of the NGOs should not contain any
provision for spending the income or assets of the NGO for purposes
other than charitable.
iii) the NGO is not working for the benefit of particular religious
community or caste.
iv) the NGO maintains regular accounts of its receipts & expenditures.
v) the NGO is properly registered under the Societies Registration Act
1860 or under any law corresponding to that act or is registered under
section 25 of the Companies Act 1956.
Extent of Benefit
There is ceiling limit upto which the benefit is allowable to the donor.
If the amount of deduction to a charitable organisation or trust is more
than 10% of the Gross Total Income computed under the Act (as reduced by
income on which income-tax is not payable under any provision of this
Act and by any amount in respect of which the assessee is entitled to a
deduction under any other provision of this Chapter), then the amount in
excess of 10% of Gross Total Income shall not qualify for deduction
under section 80G.
In other words, while computing the total income of an assessee and for
arriving at the deductible amount under section 80G, first the aggregate
of the sums donated has to be found out. Then 50 per cent of such
donations has to be found out and it should be limited to 10 per cent of
the gross total income. If such amount is more than 10 per cent of the
gross total income, the excess will have to be ignored.
To know more details and avails services for Registration under Section 12 A and approval under section 80-G, please e-mail to contact@businesswonder.com.