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12A & 80G Certification

It is important to note that when registration is granted under section 12A, it does not mean that section 80G approval is to be given i.e. registration under section 12AA will not provide automatic approval under section 80G. Section 80G applies only to charitable trusts or institution. It does not apply to religious trust or institutions

Cancellation of 12A

Registration granted u/s 12A can be cancelled in below circumstances:

I. The activities of such trust or institution are not genuine.

II. The activities are not being carried out in accordance with the objects of the trust or institution.

III. Trust’s income does not endure for the benefit of general public.

IV. It is for the benefit of any particular religious community or caste.

V. Any income or property of trust is applied for the benefit of specified persons like author of trust, trustees etc.

VI. Its funds are invested in prohibited modes.

“It is however provided that registration will not be cancelled if the trust institution proves that there was reasonable cause for carrying out activities in said manner.”

Registration of Trust under Section 12A

Trust, Society and Section 8 Company can seek registration u/s 12A to claim exemption under provisions of Income Tax Act’1961, if certain conditions are satisfied. Section 12A deals with registration of trust and section 12AA deals with procedure for registration of trust.

“It is important to note that notwithstanding the fact that trust, society and section 8 companies are registered as per their acts, the registration under section 12A is necessary to claim exemption under Income Tax Act.”

To whom application for registration is to be made?

The application for registration has to be filed with the jurisdictional commissioner of Income Tax.

Documents required for registration?

I. An application in form 10A has to be filled.

II. Documents evidencing creation of trust or the establishment.

III. Two copies of the accounts of trust, for not more than three years.

IV. In case of trust, copy of trust deed; in case of society, copy of registration certificate and copy of memorandum of association of society; in case of section 8 company, copy of certificate of incorporation and copy of MOA, AOA of company.

V. Copy of PAN Number of Trust.

Procedure for registration?

I. The commissioner on receipt an application for registration of a trust shall call for the documents and information as he thinks necessary to satisfy about the genuineness of the activities of trust.

II. He shall pass an order in writing after satisfying himself about the objects of trust.

III. If he is not satisfied, he shall pass an order in writing refusing to register the trust. Applicant shall be given opportunity of being heard before passing order of refusal.

IV. Order granting or refusing registration shall be passed before the expiry of six months from the end of month in which application was received under section 12A.

Renewal of registration?

Once the registration is granted to the trust, it will be hold good till the cancellation of registration. There is no provision which requires any renewal of registration.

Audit of Accounts

Audit is also prerequisite for claiming exemption under section 11 and 12, where the total income of the trust computed without giving effect to the provisions of section 11 and 12 exceeds Rs 2,50,000 in any previous year, then the accounts of the trust for that year should be audited by a Chartered Accountant.

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Note:

Finance Act 2017 amended section 80G so as to provide that no deduction shall be allowed under the section 80G in respect of donation of any sum exceeding Rs. 2000/- unless such some is paid by any mode other than cash. Earlier this limit was 10,000/-. However, government has taken this step in order to provide cash less economy and transparency.

Section 80G

Section 80G of the Income Tax Act’1961 provides deduction while computing the total income in the hands of donor.

The recipient of money or the donee gives a receipt of donation, based on which the donor is entitled to claim deduction provided, the donee institution is approved under section 80G of the Income Tax Act’1961.

The institution or fund should be established for charitable purposes in India.

Registration Procedure under section 80G

Rule 11AA provides procedure for seeking approval under section 80G.The application for approval of any institution shall be made in form no. 10G and it shall be made in triplicate.

Documents to be furnished

I. Copy of registration granted under section 12A.

II. Notes on the activities of institution since its inception.

III. Copies of accounts of the institution.

The commissioner may call for such further documents or information from the institution as he deem necessary to satisfy himself about the genuineness of the activities of such institution.

Where the commissioner is satisfied that all the conditions are fulfilled, he shall grant approval to the institution. When the commissioner is satisfied that conditions are not fulfilled. He shall reject the application for approval.

The time limit within which the commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the date on which such application was made.

Renewal of 80G

Prior to 01.10.2009, there was a requirement that before the expiry of the date as mentioned in the section 80G approval, renewal had to be sought for. However finance act 2009 made change in this regard. After such change, only those institutions require renewal whose expiry is due before 01.10.2009.

For the remaining cases, the perpetuity of approval has been provided until the commissioner withdraws the exemption. Therefore, there is no need for periodical renewal under present law.