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CHARITABLE INSTITUTIONS in India have to Re- register now for availing exemption under Income Tax act.

Charitable Trusts and exempt institutions have to reapply for Income Tax registration

 

The Finance Act, 2020 has made far-reaching and sweeping changes pertaining to the registration and exemptions of charitable institutions.


All the existing charitable and religious institutions (including NGOs) which are registered or approved under the Section 12A, Section 12AA, Section 10(23C) and Section 80G are compulsorily required to switch to section 12AB for fresh registration.


Currently, several hospitals, schools and colleges are registered simultaneously under section 10(23C) and 12AA. Charitable trusts and institutions currently registered under both section 10(23C) and section 12AA will now be required to apply for revalidation or renewal of either the approval under section 10(23C) or registration under section 12AA, but not both.


Section 12AA dealing with the procedure for registration of a charitable trust will cease to be applicable from June 01, 2020 instead, a new section 12AB has been inserted prescribing the procedure for fresh registration. Further, instead of the CIT (Exemption), an application is required to be made to the Principal Commissioner of Income-tax or Commissioner of Income-tax.


The Government intends to create a National Register of all charitable and religious institutions and the Income Tax Department will issue an electronically generated Unique Registration Number (URN) to all charitable and religious institutions. The process of revalidation of all the charitable and religious institutions will enable the Government to weed out all the inactive and defunct charitable institutions. In the past, many registered trusts were found engaged in malpractices for private profit earning rather than doing any genuine social work. The department wants to curb those practices. The renewal of registration after every five years will provide an opportunity to withdraw the exemptions without going through the complicated cancellation provisions.


Charitable trusts and exempt institution which are already registered under section 12A or section 12AA of Income Tax Act, 1961 will now be required to reapply online for registration and approval by August 31, 2020.  Provisions of registration under section 12AA or section 12A will become redundant from 01st June 2020 and a new section 12AB will come into force with effect from 01st June 2020. All the existing registered trusts under the erstwhile section 12A or section 12AA would move to new provision section 12AB.

 

 

  

  CA MOHAMED ASHARAF, FCA, DISA (ICA)

 +919447746535

  www.numerzone.com

  To view similar articles, please visit:  www.ashraffca.com


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