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Section 12AA of the Income Tax Act: FAQs

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Section 12AA of the Income Tax Act: An Overview

Section 12AA of the Income Tax Act, 1961 lays down the procedure for registration of a trust or institution that wants to claim exemption under section 11 and 12 of the Act. These sections provide tax exemption to charitable and religious trusts/institutions that are engaged in activities that benefit the public at large.

In this blog, we will discuss the key provisions of Section 12AA of the Income Tax Act, including the registration process, the conditions for registration, and the consequences of non-registration.

Registration Process under Section 12AA

As per section 12AA, any trust or institution that wants to claim exemption under section 11 and 12 of the Act must apply for registration with the Income Tax Department. The application must be made in Form 10A and should be accompanied by the following documents:

  1. A copy of the trust deed or the instrument creating the institution.
  2. A copy of the registration certificate, if any, issued by any other authority.
  3. A copy of the PAN card of the trust or institution.
  4. A list of the trustees or members of the governing body.
  5. A statement of the activities of the trust or institution since its inception or during the previous three years, whichever is less.
  6. A copy of the accounts of the trust or institution, including the balance sheet, income and expenditure account, and the audit report.

Conditions for Registration under Section 12AA

To qualify for registration under section 12AA, the trust or institution must satisfy the following conditions:

  1. The trust or institution must be established for charitable or religious purposes.
  2. The income of the trust or institution must be applied for charitable or religious purposes.
  3. The trust or institution must maintain regular books of accounts.
  4. The accounts of the trust or institution must be audited by a chartered accountant.
  5. The trust or institution must file its annual return of income with the Income Tax Department.

Consequences of Non-Registration under Section 12AA

If a trust or institution does not get registered under section 12AA, it will not be eligible for tax exemption under section 11 and 12 of the Income Tax Act. This means that the income of the trust or institution will be subject to tax at the applicable rate.

Conclusion

Section 12AA of the Income Tax Act is an important provision that lays down the procedure for registration of charitable and religious trusts/institutions. By complying with the conditions for registration, such trusts and institutions can avail of tax exemption under the Act. It is advisable for trusts and institutions to get registered under section 12AA to avoid any adverse consequences in the future.

Other Related Blogs: Section 144B Income Tax Act

Frequently Asked Questions (FAQs)

Q. What is Section 12AA of the Income Tax Act, 1961?

  • Section 12AA of the Income Tax Act, 1961 provides the procedure for registration of trusts or institutions that want to claim exemption under section 11 and 12 of the Act.
  • Q. Who can apply for registration under Section 12AA?
  • Any trust or institution that is established for charitable or religious purposes and wants to claim exemption under section 11 and 12 of the Income Tax Act can apply for registration under Section 12AA.
  • Q. What documents are required for registration under Section 12AA?
  • The application for registration under Section 12AA should be made in Form 10A and should be accompanied by documents such as a copy of the trust deed, a copy of the registration certificate (if any), a copy of the PAN card, a list of the trustees or members of the governing body, a statement of the activities of the trust or institution, and a copy of the accounts of the trust or institution.
  • Q. What are the conditions for registration under Section 12AA?
  • The trust or institution must be established for charitable or religious purposes, and the income of the trust or institution must be applied for charitable or religious purposes. The trust or institution must maintain regular books of accounts, get its accounts audited by a chartered accountant, and file its annual return of income with the Income Tax Department.
  • Q. What are the consequences of non-registration under Section 12AA?
  • If a trust or institution does not get registered under Section 12AA, it will not be eligible for tax exemption under section 11 and 12 of the Income Tax Act. This means that the income of the trust or institution will be subject to tax at the applicable rate.
  • Q. How long does the registration under Section 12AA remain valid?
  • The registration under Section 12AA remains valid until it is cancelled or surrendered by the trust or institution. The trust or institution must also comply with the conditions for registration to continue availing tax exemption under section 11 and 12 of the Income Tax Act.
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