How to obtain 12AA Registration in India?

12AA registration is done to receive an exemption from Income Tax. Every income of the association cannot be taxed once this Registration is completed. Commissioner of Income-tax department who holds the jurisdiction over the institution is responsible for processing your application of Registration under section 12AA. Exception on Income Tax is available for all NGOs, but only those who are aware of it and can take benefit out of it. Hence, to entertain the allowance of exemption limit, it is necessary for all NGOs, Trusts, and other Not-for-Profit organizations to be aware of Section 12AA of the Income Tax Act.

What is the relation of Form 10A with 12AA?

Establishments that are eager to get recorded needs to file Form 10A under Section 12AA. Administrations like Charitable Trusts, Religious Trusts, Societies, and Section 8 Company are qualified to apply for Section 12AA registration. 12AA registration process, along with Form 10A filing, has been made online and can only be made possible with the digital signature of the participant.

What are the advantages of 12AA Registration in India?

The advantages of 12AA Registration are-

·      The deposit which you are planning to use for the charitable or religious purpose will be regarded as income submission. In layman term, income submission is considered as an expense which is incurred by the Trust on charity or spiritual meaning.

·        The final income acknowledged will be exempted from tax.

·       An organization or person who is registered under this section can take advantage of the accumulation of income, which cannot exceed 15% for charitable or religious purposes.

·         Section 11(2) considers the accumulation of income as a submission of income hereafter; it is not involved in the total income.

·   NGOs enjoy the benefit of receiving multiple permits from the government and other agencies. Some agencies offer monetary support to NGOs, and these agencies usually prefer to make grants to 12AA registered NGOs.

·   Registration under Section 12AA is a onetime procedure. Registration, once done, remains valid till the date of cancellation. 12AA registration does not require to be renewed; henceforth, it can be considered as an advantage avail by the NGO.

What are the documents mandatory for 12AA Registration in India?

The following documents, along with Form 10A, are required:

·   Instruments self-certified copy, which was used in the process of creating Trust or establishing the institution, shall be provided.

·        The Trust may have been made by method for drafting and registering any instrument. A self-attested copy of the document authorizing the creation of the Trust, or foundation of the institution must be submitted to the Department of Income Tax.

·   a self-attested copy of theincorporation, which was made with the relevant body. The pertinent body might be the Registrar of Company, the Registrar of Firm and Society, or Registrar of Public Trusts.

·       A self-attested copy of the document that serves as an indication at the time of adoption or during alteration of the neutral of the individual has to be submitted.

·         Fiscal report of the trust or institution for a maximum of three preceding fiscal years.

·         Note on activities that the business performs;

·   There are few cases that may force the Income Tax Department to cancel the incorporation issued under the section. However, once the assessee has resolved the issue, he can file for the succeeding application. In such a scenario, the applicant needs to submit a self-attested copy of the existing order issuing incorporation.

·      In case assessee application is dismissed, he needs to attach a self-attested copy of the order of rejection along with the application.

What is the eligibility criteria for obtaining 12AA Registration in India?

The eligibility criteria are as follows-

·      One of the prime criteria to receive incorporation under Section 12AA is that the purpose behind the existence of the association is to do charitable job as defined. Involving in charitable activities include providing education, medical relief to the poor, and performing operations with the motive to prevent the atmosphere.

·   Before providing any registration certificate under Section 12AA, governmental authorities will check whether there is any profit motive involved in directing the activities, if not, Registration under Section 12AA will be granted.

·    If the assessee is engaged in doings like trade or commerce, then the services obtainable under this section remains limited. Incorporation is granted only to those applicants whose receipts from the trade activity are less than twenty per cent of the total revenues.

·     Private or any Family Trust are not eligible to apply for Section 12AA registration.

What is the registration process for obtaining 12AA Registration in India?

·     Once you have applied in the prescribed format available online, the Commissioner will ask you to submit additional documents as per the other requirements. The request for further verification of the materials will help in proving the authenticity of the activities of the association.

·     If the Officer is happy with the application, then they will register the Trust or Institution under Section 12AA, all the Officers are required to pass an order for the registration process to initiate.

·    Under Section 12AA(2) states that registering authority shall give the order of granting or declining Registration before the expiry of six months from the end of the month in which the application was established.

· 12AA Registration takes approx 1 to 3 months in India. When a Trust acquires Registration, it is genuine for the lifetime of the Trust, and there is no requirement for renewal.

What is the process for cancellation of 12AA Registration in India?

Where a trust or an establishment has been registered under Section 12AA(1)(b) or has acquired Registration certificate when under Section 12A as it continued before the correction by the Finance Act, 1996, the Principal Representative or the Administrator of Income-tax can drop the Registration under two sub-sections:

1.      Cancellation Of Registration Of Trust Under Section 12AA(3)

The Principal Representative or Administrator in the stir of giving a reasonable chance of being heard to the concerned Trust or foundation, asks for a request under Section 12AA(3) in written regarding the cancelling the Registration under the following two conditions:

·         The actions of a trust or foundation are not genuine, or;

·         The activities are not being done as per the objective of the Trust or institution.

                                                                                                

2.     Cancellation Of Registration Under Section 12AA (4)

To look after the provisions related to the cancellation of Registration of a trust, section 12AA(4) was entrenched to give that where a trust or a foundation has approved enrollment, and it is seen that section 13(1) is applicable as activities are being completed in such a way, that

·  It is for the benefit of a specific religious community or caste;

·  Any salary or property of the Trust is for the advantage of determined people like the owner of Trust, trustees; or

·  Its assets are put resources into constrained methods,

·   At the point, the Principal Representative or the Administrator may choose to pass an order in writing stating the cancellation of Registration of any Trust or institution.

Registration will not be cancelled under Section 12AA(4) if the Trust or foundation proves that they have a genuine reason to conduct the above-stated activities.

Conclusion

Commissioner of Income-tax department who holds the jurisdiction over the institution is responsible for processing your application of Registration under section 12AA. Exception on Income Tax is available for all NGOs, but only those who are aware of it and can take benefit out of it. Hence, to entertain the allowance of exemption limit, it is necessary for all NGOs, Trusts, and other Not-for-Profit organizations to be aware of Section 12AA Registration of the Income Tax Act. In case of any query, contact Corpbiz.