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Section 12a of income tax act

What is 12a of Income Tax Act?

Section 12A of Income Tax Act. Under the Income Tax Act, 1961, non-profit entities such as charitable trusts, religious organizations, NGOs which are registered under Section 12A are eligible to claim full exemption from income tax.

What is the Form 12?

Form 12 or Form 12S allows you to complete a return of your income and claim tax credits, allowances and reliefs (including any health expenses) for a year. You do not have to file a Form 12 or Form 12S unless Revenue have asked you to do so.

Benefits under Section 12A

The donor can receive tax exemption on the donated amount if the trust or NGO where the donation is done is being registered with Section 80G. When the donor donates from their income towards the trust or NGO, they can get tax exemption on that amount. By registering for Section 80G, trust and NGO tend to increase their value and respect due to which donors are more confidently able to donate large amounts towards them. Donors feel a sense of humanity and satisfaction by donating to such renowned trusts or NGOs. Section 12A registered trusts or NGOs can also receive multiple benefits under registration of Section 80G. he donor can donate only the 50% of their total income in order to receive the tax exemption.  The government funds and grants are easily available to such trusts and NGOs which are registered with Section 12A and Section 80G.


How can one become eligible under Section 12A?

As per the criteria the incorporated trusts, Section 8 companies and societies which provide public welfare and do not earn a profit through them are considered eligible for Section 12A registration. once the trust or organization is eligible they must fill the 10A form through online application. The digital signature is required for the applicant trust or organization to file 10A. The 10A form can also be filed electronically through the electronic verification code. he trusts or societies can be religious, welfare, and charitable to be eligible for the same. The trusts or societies which are private or only owned by family are not eligible to the Section 12A registration.

While registering for Section 12A, The documentation required is:

  • Self-certified copy of establishment of trust or organization
  • Copy of registration with registrar of companies or public trusts or firms and societies.
  • Self-attested document copies of yearly account of the trust or society
  • Evidence supporting documents of the establishment of the trust or society
  • they should also provide self-certified copy of the application rejection order for the grant of registration.
  • The trust, society or organization should provide a self-certified document having existing order granting registration under the Section 12Aor Section 12AA
  • The trust or society should provide the note which has complete details of the activities

Terms and Guidelines for NGOs and Charitable Organisations

  1. If the NGO or trust has their other business through which they have other income then they are not eligible for the exemption.
  2. If charitable organizations registered as NGO are working for a specific caste or community, then the NGO will be disqualified from the exemption of tax.
  3. The trusts and NGOs should only accept cash donations till an amount of Rs 2,000 from the donors.
  4. These trusts and NGOs should regularly maintain account books and receipts otherwise will be non-eligible for the exemption.
  5. Amounts exceeding Rs 2000 should be done through electronic transfer or through cheque.
  6. If the NGO or trust has their other business through which they have other income then they are not eligible for the exemption.

what are Amendments under 12A

  • Corpus donations are not considered as application of income for the trusts and organizations registered under Section 12A.
  • The amount which is paid to any other trust or organization which is registered under Section 12AA will not be considered as application of income for any religious or charitable purpose.
  • The second amendment states that when a trust or organization registered with Section 12A has undertaken certain modifications which will further not conform to the registration guidelines should have to obtain new registration by applying within thirty days period from the date of undertaking modifications.
  • If the property is received from any foundation or university or institution or hospital or Section 12A registered trusts then this clause in Section 56 will not be applied to any property or funds. In order to develop a cashless economy and practices, the government has set a limit of Rs 2,000 for the tax deduction done through the donation. 
  • The next amendment states that if any person receives a property from the trust or organization without any consideration then the property amount will be considered as taxable under ‘income from other sources’ head.

Conclusion

Trusts and organization’s who does not earn a profit through working are eligible under this act. However, once the form is filed and the necessary documents are verified, the registration is applicable for lifetime. There are various documents which are required for one to file the form under this section. All the registered organization’s under this section need to continue to work for the welfare of this country as per the Government of India. Charitable trusts and organization’s along with people who donate their incomes up to 50% can benefit under this section of the Income Tax Act.

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