12AB Registration: Process, Benefits, and Documents

Introduction

The Income Tax Act of 1961 governs the imposition of income tax in India, and that is irrespective of whether it is imposed on a non-profit organization. A critical prerequisite in the same line is the registration under Section 12AB. Section 12AB is the most prominent registration that charities, trusts, or not-for-profit organizations seek to get exemption under the Income Tax Act. The registration made under Section 12AB is given for an initial period of 5 years. All this being said, if the organization intends to continue availing tax benefits, it should make an application for renewal well before the end of this validity period. Application for renewal in time ensures that there is no break in the tax exemption status. The following guide will elucidate the procedure in obtaining 12AB registration online, its significance, and the latest trends and updates on 12AB registration online in India.

What is 12AB Registration?

Section 12AB of the Income Tax Act that has provided for the registration of charitable or religious trusts and institutions came into force through the Finance Act, 2020. Earlier, those organizations came under 12A. The whole aim behind this shift from 12A to 12AB was to relax the process of registration so that better compliance can be made. Some of the key objectives of 12AB registration online are as follows:

• Tax Exemption: Being registered under Section 12AB, tax exemption is provided for such organizations on that part of the income that is utilized for charitable or religious purposes.
• Genuinity and Compliance: It confirms genuinity about the existence of the organization and it strictly adheres to legal norms.
• Transparency: The financial affair of this organization shall remain transparent because of the 12AB registration procedure and the eligibility criteria for 12AB Registration.

Eligibility Criteria for 12AB Registration of Income Tax Act

Below are the criteria for getting registered under Section 12AB of the Income Tax Act:

• Nature of Organisation: The body must be a charitable or religious trust, institution, or association.
• Objective: The primary objective must be the provision for charitable purposes such as education, relief of poverty, medical relief, etc.
• Application: The institution must apply to the Income Tax Department in the prescribed manner.

Who can do 12AB Registration Online in India

The following are those who can avail relief of 12AB Registration of Income Tax Act:

• Trusts: Charitable or religious trusts constituted for carrying out activities that are charitable in nature.
• Societies: Societies registered under the Societies Registration Act, being non-profit, but aiming at charitable objectives.
• Companies under the Companies Act, 2013: Companies with an object to promote commerce, art, science, sports, education, research, social welfare, etc., and does not distribute its profits to its members.
• Association of Person: An association formed for charity and for which purposes, it may not be registered as a trust or society.
• Religious Organizations: Religious organizations that were primarily organized for religious purposes but are doing charitable activities also.

Benefits of 12AB Registration

Some of the major benefits of registering under Section 12AB of the Income Tax Act are as follows:

• Income generated by the organization for charitable purposes is exempt from income tax, which means more funds available for activities.
• The donor is motivated by registering in the organizations since his donation made under the respective organizations can be eligible for deductions from the income under section 80G.
• This registration increases the credibility of the organization in the donor's eyes, the beneficiary's eyes, and in the eyes of the general public.
• Most government and private sector grants require registered organizations under Section 12AB to qualify for grants.
• The registration shows formal standing that is appreciable for compliance and while communicating with other organizations and authorities.
• The registered organizations can have some specific rules related to financial and operational compliance, which can help in better management and governance.
• Any registration under 12AB will bring sure continuations of tax benefit, provided the organization meets all conditions and obligations required.

List of Required 12AB Registration Documentation

Some of the most important documents needed for the 12AB registration online in India are given below:

• Application form
• Constitutional documents like Trust deed
• Registration certificate
• PAN card
• Proof of Address
• Bank Statement
• Audited Financial statements
• Income details
• Exemption certificate of Income Tax
• Philanthropic activities

Step by Step 12AB Registration Procedure

Follow the steps provided below to do 12AB registration online in India:

The organization must provide a Trust Deed or Memorandum outlining its purpose and workings, a PAN Card with its permanent account number, a registration certificate if required, financial statements for the previous year or projected financials, and a brief description of its activities.

Step 2: Fill 12AB Registration Form 10A

Application for Registration Fill Form 10A. This form requires everything to be registered. Ensure that all the information filled in is accurate and detailed. This form is generally available on the official income tax department's website.

Step 3: Form 10A submission to the Income Tax Assessing Officer

The filled Form 10A, along with other accompanying documents, must be submitted to the Income Tax Assessing Officer. Generally, these submissions can be accessed online and submitted on the income tax website.

Step 4: Verification by Income Tax Authorities

After submission, the application and documents that have been submitted are examined by the income tax authorities. Additionally, the authorities may solicit some supplementary information or clarification.

Step 5: Personal Hearing (if required)

In some instances, the authorities may call for a personal hearing to decide over the application further. Be ready to share about the goals and actions of your group.

Step 6: Registration

After the acceptance of an application, the income tax authority will issue a Certificate of Registration under Section 12AB with the extent of validity and conditions, if any.

Step 7: Compliance Maintenance

Once registered, continue to be in compliance with the provisions of the Income Tax Act. This includes annual returns and keeping proper accounts.

Step 8: Renewal where applicable

Registration can also come with a requirement to renew a certain number of years after registration, and the organization must ensure that the registration requirements are being met at all times.

How Long Does 12AB Registration Take?

The submission to approval, and this processing time can go up to 2-6 months and further can vary based on the completeness of the application for registration and further requests by the Income Tax Department and the current workload.

Why Choose Bizfoc?

Choosing Bizfoc for 12AB Registration ensures expert handling, accuracy, and efficiency, with their extensive experience and up-to-date knowledge of regulations. They streamline the filing process, minimize errors, manage documentation, and offer ongoing support, freeing up your time and reducing compliance risks.

Conclusion

Section 12AB Registration is highly important for charitable religious organizations in India since it gives massive relief in taxation with the organization undergoing all clarity in compliance. Companies need to go through the registration processes, be eligible, and have an eye on regulation developments to remain registered and enjoy the benefits of Section 12AB. Not-for-profit societies would consult experts in matters of tax and law to ensure that the proper registrations are made. Provided the correct approach is adopted, the registration under Section 12AB would hugely benefit charitable and religious activities across India.

Frequently Asked Questions