Trust: Income tax registration for Trust under Income Tax Act

Last Updated at: January 08, 2020
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Trust: Income tax registration for Trust under Income Tax Act

Did you know that Trusts can enjoy income tax exemption under the Income Tax Act? Yes, a Trust that gets registered under Section 12A of the Income Tax is exempted from paying income taxes. This article covers all that you need to know about income tax registration for trusts. 

A charity or Trust is any type of NGO or organisation that mainly works for the benefit of the needy. Such companies do not have their best interests in mind but rather, work as a form of community service, or in order to give back to society. As a way of encouraging such organisations, the government has allowed various tax benefits.

12A Registration

12A registration is a one-time exemption that Trusts can avail, which helps them get exempted from paying tax right after their incorporation. Section 8 of the Income Tax Act, allows companies, Trusts and NGOs registered under 12A to be exempted from paying tax on their surplus income. This sort of a tax benefit is available to all non-profit NGOs functioning in India. Hence, it is vital that Trusts, NGOs and other Not-for-Profit organisations be aware of and register as per Section 12A of the Income Tax Act in order to avail this benefit.

Trusts can avail the following benefits: 

Benefits of 12A Registration 

  1. Funds utilised for charitable or religious uses are deemed as income application and is hence added to the value of the Trust rather than being considered taxable income.
  2. Income received by an organisation registered as per 12 A is exempt from taxation.
  3. Such organisations may set aside up to 15% of their income as an investment.
  4. Laws under Section 11(2) which states that accumulated wealth be taxed, is not viable for organisations registered under 12 A.
  5. Access to grants and other funds from agencies in and around India.
  6. Avail benefits listed under the Finance Act 2014.
  7. As it is a one-time registration, it will be valid until it is cancelled and hence, it requires no renewal or excessive paperwork.

Form 10A

Charitable and Religious Trusts and all sections which abide by the rules prescribed in Section 8, which try to claim the tax benefits as mentioned in Sections 11 and 12 of the Income Tax Act, must have a valid 12A registration to be able to do so. To complete the12A registration, applicants must submit Form 10A online to the Commissioner of Income Tax.

E-file Your Income Tax Returns

Documents required for 12A

You need to attach the following documents for 12A registration:

  • Copy of creation which unambiguously established the Trust’s creation, its location and date of establishment.
  • Document regarding the location and whereabouts of the trust.
  • Copy of the Trust registration with Registrar of Companies/Firms/Societies/Public Trusts
  • Document regarding the adoption of objects if applicable
  • Accounts-related copies of the Trust
  • A document containing information about the  activities of the Trust
  • Copy of 12 A registration
  • Copy of the rejection order received when the Trust had applied for a 12A registration if applicable. 

Procedure to register for 12A

  1. Submit Form 10 A with the documents prescribed above.
  2. You can file Form 10A online if you have your digital signature ready. Else, you can file it via an electronic verification code. 
  3. The Commissioner will then request for additional documents or information to prove the genuineness of your Trust if deemed necessary.
  4. Once satisfied, the Commissioner will register the Trust as per 12A of the Income Tax Act.
  5. In case he/she is not satisfied, they will reject the application.
  6. Generally, this process takes around 3 months to complete. 
  7. Once the registration order has been passed, the Trust will have a 12A validity forever as it is a one-time application or registration process. 
  8. The Trust does not have to renew this registration ever.

How To File Form 10A Online?

  • Access income tax website. 
  • Click on ‘Submit Returns/Forms’ which is visible on the left-most bar on the page.
  • Go to the ‘Login’ option and input your credentials.
  • Click on ‘e-file‘ option and then go to ‘Income Tax Forms’ from the drop-down menu.
  • Choose Form 10A in the “Form Name” field and choose the appropriate assessment year.
  • Click on ‘Prepare and Submit Online’ and then enter ‘Continue’.
  • Fill out the form by entering the details it has asked for. Make sure you re-read everything and avoid typos.
  • Click on  ‘Submit’ once you are done.

0

Trust: Income tax registration for Trust under Income Tax Act

1224

Did you know that Trusts can enjoy income tax exemption under the Income Tax Act? Yes, a Trust that gets registered under Section 12A of the Income Tax is exempted from paying income taxes. This article covers all that you need to know about income tax registration for trusts. 

A charity or Trust is any type of NGO or organisation that mainly works for the benefit of the needy. Such companies do not have their best interests in mind but rather, work as a form of community service, or in order to give back to society. As a way of encouraging such organisations, the government has allowed various tax benefits.

12A Registration

12A registration is a one-time exemption that Trusts can avail, which helps them get exempted from paying tax right after their incorporation. Section 8 of the Income Tax Act, allows companies, Trusts and NGOs registered under 12A to be exempted from paying tax on their surplus income. This sort of a tax benefit is available to all non-profit NGOs functioning in India. Hence, it is vital that Trusts, NGOs and other Not-for-Profit organisations be aware of and register as per Section 12A of the Income Tax Act in order to avail this benefit.

Trusts can avail the following benefits: 

Benefits of 12A Registration 

  1. Funds utilised for charitable or religious uses are deemed as income application and is hence added to the value of the Trust rather than being considered taxable income.
  2. Income received by an organisation registered as per 12 A is exempt from taxation.
  3. Such organisations may set aside up to 15% of their income as an investment.
  4. Laws under Section 11(2) which states that accumulated wealth be taxed, is not viable for organisations registered under 12 A.
  5. Access to grants and other funds from agencies in and around India.
  6. Avail benefits listed under the Finance Act 2014.
  7. As it is a one-time registration, it will be valid until it is cancelled and hence, it requires no renewal or excessive paperwork.

Form 10A

Charitable and Religious Trusts and all sections which abide by the rules prescribed in Section 8, which try to claim the tax benefits as mentioned in Sections 11 and 12 of the Income Tax Act, must have a valid 12A registration to be able to do so. To complete the12A registration, applicants must submit Form 10A online to the Commissioner of Income Tax.

E-file Your Income Tax Returns

Documents required for 12A

You need to attach the following documents for 12A registration:

  • Copy of creation which unambiguously established the Trust’s creation, its location and date of establishment.
  • Document regarding the location and whereabouts of the trust.
  • Copy of the Trust registration with Registrar of Companies/Firms/Societies/Public Trusts
  • Document regarding the adoption of objects if applicable
  • Accounts-related copies of the Trust
  • A document containing information about the  activities of the Trust
  • Copy of 12 A registration
  • Copy of the rejection order received when the Trust had applied for a 12A registration if applicable. 

Procedure to register for 12A

  1. Submit Form 10 A with the documents prescribed above.
  2. You can file Form 10A online if you have your digital signature ready. Else, you can file it via an electronic verification code. 
  3. The Commissioner will then request for additional documents or information to prove the genuineness of your Trust if deemed necessary.
  4. Once satisfied, the Commissioner will register the Trust as per 12A of the Income Tax Act.
  5. In case he/she is not satisfied, they will reject the application.
  6. Generally, this process takes around 3 months to complete. 
  7. Once the registration order has been passed, the Trust will have a 12A validity forever as it is a one-time application or registration process. 
  8. The Trust does not have to renew this registration ever.

How To File Form 10A Online?

  • Access income tax website. 
  • Click on ‘Submit Returns/Forms’ which is visible on the left-most bar on the page.
  • Go to the ‘Login’ option and input your credentials.
  • Click on ‘e-file‘ option and then go to ‘Income Tax Forms’ from the drop-down menu.
  • Choose Form 10A in the “Form Name” field and choose the appropriate assessment year.
  • Click on ‘Prepare and Submit Online’ and then enter ‘Continue’.
  • Fill out the form by entering the details it has asked for. Make sure you re-read everything and avoid typos.
  • Click on  ‘Submit’ once you are done.

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