Re-registration u/s 12AB for all Charitable Trusts: –
All the charitable trusts, section 8 companies, Societies etc need to register again with the Income Tax Authority within 3 months from 1st October 2020. All such existing charitable trusts/institutions to apply for re-registration of 12A (w.e.f. 1st October 2020).
It has been proposed that all existing trusts or institutions which are registered under Section 12A or under Section 12AA of the Income Tax Act, shall be mandatorily required to make new application and such trust or institution should obtain registration under section 12AB.
Such application has to be done within 3 months commencing from 1st October 2020. Registration shall be granted by the Principal Commissioner by passing an order within a period of three months from the end of the month in which the application was received and such registration shall be valid for a period of 5 years.
If such application is not made then already granted earlier registration shall stand cancelled on the expiry of 3 months.
If the registration gets cancelled then, such trust or institution shall not be eligible for claiming exemption in respect of its income under section 11 of the Act.
It may be noted that as per section 115TD of the Act, such trust or institution shall be required to pay tax on the aggregate fair market value of the total assets of the trust or the institution as on 31st August, 2020 which exceeds the total liability of such trust on that date.
The tax payable on such value shall be at the maximum marginal rate.
Further, a trust or institution will be required to apply for re-registration at least six months prior to the expiry of the period of registration of 5 years.
Re-Approval u/s 80G for all Trust & NGO:
All the trusts and NGO’s which already have 80G approval need to get it afresh within 3 months from 1st October 2020. In short, approval under Section 80G has to be obtained afresh w.e.f. 1st October 2020.It is provided that all existing trusts or institutions which have obtained approval u/s 80G of the Income Tax Act shall be mandatorily required to make new application and such trust or institution should obtain approval u/s 80G afresh.
Such application is to be done within 3 months commencing from 1st October 2020. Such new approval u/s 80G shall not be for perpetuity but for a period of 5 years only and has to be applied again at least 6 months prior to the expiry of the period of registration.
Donations to be reported to Income Tax Authorities
Donors will get deduction only based on return filed by trusts.
It means that it will be almost similar to like 26AS TDS credit. There is an obligation on Trust or Institution to file Annual Statement of Donation.
Every trust or institution approved under section 80G to file statement of donation received and also to issue the certificate to the donor.
Deduction to Donor u/s 80G can be allowed only on the basis of the statement filed by the donee trust or institution.
Most important, in case of delay in filing such statement a late fee of Rs.200 per day shall be applicable along with Penalty of Rs. 10,000 to Rs 100,000/-
Re-registration if any of the objects is changed
If your trust has changed its objects then also it need to re apply for Income Tax Registration.
Such application for re-registration to be made within 30 days in the case of modification of the object w.e.f. 1st June 2020.
Where the trust or institution has adopted or undertaken modification of its objects which do not conform to the conditions on the basis of which registration was granted earlier, then such trust or institution need to apply afresh for registration within a period of 30 days from the date of said adoption or modification.
Power of Commissioner to cancel your Trust Registration
Powers have been given to Commissioner of Income Tax w.e.f. 1st October 2020 to cancel trust registration,
if the activities are not in accordance with the objects of the trust.
Where the activities of the trust are not genuine or not being carried out in accordance with the objects of the trust
or where the trust is not eligible for exemption under section 11 or section 12 in view of the violation of section 13(1) of the Income Tax Act
or the trust or institution has not complied with the requirement of any other law for the time being enforced, then commissioner can cancel the registration of the trust.
It may be noted that as per section 115TD of the Act, such trust or institution shall be required to pay tax on the aggregate fair market value of the total assets of the trust or the institution as on 31st August, 2020 which exceeds the total liability of such trust on that date.
The tax payable on such value shall be at the maximum marginal rate.
Further, now onwards a trust or institution will be required to apply for re-registration at least six months prior to the expiry of the period of registration of 5 years.