Revalidation of 80G and 12A

Revalidation of 80G and 12A. In India, charitable and religious institutions benefit from tax exemptions under Sections 12A and 80G of the Income Tax Act, 1961. These provisions are pivotal in promoting philanthropic activities by offering tax relief to both the institutions and their donors. However, the Finance Act, 2020, introduced significant amendments necessitating the revalidation of existing registrations under these sections. This article delves into the intricacies of these amendments, the revalidation process for Registration under 12A and 80G, required documentation, and the implications for charitable organizations.
 Legislative Background: Finance Act, 2020
The Finance Act, 2020, introduced a mandate requiring charitable institutions registered under Sections 12A, 12AA, and/or 80G of the Income Tax Act, 1961, to revalidate their registrations. Subsequently, on March 26, 2021, the Central Board of Direct Taxes (CBDT) issued the Income-Tax (6th Amendment) Rules, 2021, detailing the procedure for fresh registration and specifying the necessary documentation for organizations under these sections.
Initially, due to the COVID-19 pandemic, the implementation of the new registration procedure was deferred to October 1, 2020, with charitable institutions required to reapply by December 31, 2020. However, further adjustments led to the new provisions becoming effective from April 1, 2021. Consequently, institutions and trusts holding existing registrations under Sections 12A, 12AA, and/or 80G were obligated to submit applications for fresh registration within three months from this date, i.e., by June 30, 2021, as stipulated in the Income-Tax (6th Amendment) Rules, 2021.
Section 12A: Tax Exemption for Charitable Institutions
Section 12A offers tax exemptions to non-profit organizations such as charitable trusts, welfare societies, NGOs, and religious institutions. By registering under this section, these entities can avail tax relief, acknowledging their role in social welfare rather than profit generation .
It's important to note that Section 12A applies to institutions registered before 1996, while Section 12AA pertains to those registered after 1996. Regardless of their legal structure—be it a society, trust, or not-for-profit company—NGOs must obtain 12A certification to benefit from tax exemptions.
Section 80G: Tax Deductions for Donors
Section 80G allows donors to claim tax deductions for contributions made to eligible charitable institutions. While this registration doesn't directly benefit the institutions, it incentivizes donations by providing tax relief to contributors .
Only NGOs registered under both Sections 12A and 80G are eligible to receive government funding. This dual registration ensures that the institution is recognized for its charitable purpose and that its donors can avail tax benefits.
While Section 12A registration exempts charitable institutions from paying income tax, Section 80G registration enables their donors to claim tax deductions, fostering a mutually beneficial relationship between the institutions and their supporters.
Procedure of Revalidation Under Section 12A and 80G
To claim tax exemptions under Sections 12A and 80G of the Income Tax Act, 1961, charitable and religious institutions, including NGOs, must undergo a revalidation process. This process involves submitting Form 10A online to the Principal Commissioner or Commissioner of Income Tax. Below is a step-by-step guide to the revalidation procedure:

Access the Income Tax E-filing Portal: Log in to the official Income Tax Department's e-filing website.

Go to Income Tax Forms: Under the 'e-File' tab, select 'Income Tax Forms'.

Select Form 10A: Choose 'Form 10A' from the list and select the relevant Assessment Year.

Prepare and Submit Online: Opt for the 'Prepare and Submit Online' mode.

Complete the Form: Fill in all required details and attach necessary documents.

Verification: Submit the form using an Electronic Verification Code (EVC) or Digital Signature Certificate (DSC), as applicable.

It's important to note that organisations applying for registration or revalidation under Section 80G must provide their registration number from the DARPAN portal of NITI Aayog. This requirement is mandatory, especially for those receiving or intending to receive grants or assistance from the Central or State Government.
Documents Required for Revalidation of 80G and 12A
To ensure continued tax-exempt status and eligibility for donor deductions, charitable and religious organizations must revalidate their registrations under Sections 12A and 80G of the Income Tax Act, 1961. The revalidation process requires submission of specific documents that establish the organization's legal standing, financial integrity, and compliance with relevant laws. Below is a detailed list of the documents necessary for revalidation:

Self-Certified Copy of Incorporation Document: A certified copy of the trust deed, memorandum of association, or any other founding document that evidences the establishment of the society or trust.

Self-Certified Copy of Registration Certificate: A certified copy of the registration certificate issued by the appropriate authority, such as the Registrar of Companies, Registrar of Societies, Registrar of Firms, or Registrar of Public Trusts, depending on the nature of the organization.

Self-Certified Copy of FCRA Registration (if applicable): If the organization is registered under the Foreign Contribution (Regulation) Act, 2010, a certified copy of the FCRA registration certificate must be provided.

Self-Certified Copy of Existing Registration Order: A certified copy of the existing order granting registration under Section 12A, 12AA, or 12AB, as applicable.

Annual Accounts for the Past Three Years: Copies of the organization's annual accounts for up to three financial years immediately preceding the year in which the revalidation application is made. This requirement applies to existing entities.

Audit Reports Under Section 44AB (if applicable): If the organization's income includes profits and gains from business activities, or if it holds a business undertaking under the provisions of Section 11(4A), copies of the annual accounts and audit reports under Section 44AB for the past three financial years are required.

Self-Certified Copy of Modified or Adopted Objects: A certified copy of documents evidencing any modifications or adoptions of the organization's objectives.

Notes on Activities: A detailed note outlining the activities undertaken by the trust or institution, demonstrating its engagement in charitable or religious endeavors.

Darpan Registration Details (if registered): If the organization is registered on the DARPAN portal of NITI Aayog, details of this registration must be provided.

These documents must be submitted electronically through Form 10A on the Income Tax Department's e-filing portal. The form should be verified using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC), depending on the organization's filing requirements.
Ensuring the accurate and complete submission of these documents is crucial for the successful revalidation of registrations under Sections 12A and 80G, thereby maintaining the organization's tax-exempt status and enabling donors to claim applicable tax deductions.
Issuance of Certificate of Revalidated Registration under Sections 12A and 80G
Following the amendments introduced by the Finance Act, 2020, and effective from April 1, 2021, charitable and religious institutions seeking to maintain their tax-exempt status under Sections 12A and 80G of the Income Tax Act, 1961, are required to undergo a revalidation process. This process ensures that such entities continue to comply with the stipulated conditions for tax exemption and donor deductions.
1. Application and Processing Timeline 
Upon submission of the revalidation application through Form 10A on the Income Tax Department's e-filing portal, the Principal Commissioner or Commissioner of Income Tax (PCIT/CIT) is mandated to process the application within three months. If satisfied with the application and accompanying documents, the PCIT/CIT will issue an order granting revalidated registration in Form 10AC. This order includes a 16-digit alphanumeric Unique Registration Number (URN), signifying the entity's compliance and eligibility for tax exemptions and donor benefits .
2. Validity and Renewal of Registration 
The revalidated registration granted under Form 10AC is valid for a period of five years. To ensure uninterrupted tax-exempt status, organizations must apply for renewal at least six months before the expiry of the current registration. This subsequent application is to be made using Form 10AB. Upon review, the PCIT/CIT will issue an order in Form 10AD, which may grant renewal, reject the application, or cancel the registration, depending on the entity's compliance and activities.
3. Assessment and Potential Rejection 
During the evaluation of both initial and renewal applications, the PCIT/CIT holds the authority to request additional documents or information to verify the genuineness of the organization's activities and adherence to legal requirements. If the assessing officer finds discrepancies or non-compliance, they may reject the application. However, such rejection can only occur after providing the applicant an opportunity to be heard. Rejection orders are also communicated through Form 10AC for initial applications and Form 10AD for renewals. 
4. Importance of Compliance 
Maintaining valid registration under Sections 12A and 80G is important for charitable and religious institutions to avail income tax exemptions and to enable donors to claim deductions on their contributions. Timely revalidation and adherence to the procedural requirements ensure continued eligibility for these benefits and uphold the organisation's credibility and compliance with the Income Tax Act.
Conclusion
The revalidation of registration under Sections 12A and 80G signifies an important move towards greater transparency and accountability in the charitable sector. Institutions must diligently adhere to the revised provisions to continue availing tax benefits and to uphold the trust of their donors. Timely compliance not only ensures uninterrupted operations but also reinforces the institution's commitment to genuine charitable endeavours.
Frequently Asked Questions (FAQs)
Q1. What is the significance of Sections 12A and 80G of the Income Tax Act, 1961, for charitable organizations?
Ans. These sections provide tax exemptions and deductions, respectively, which are crucial for promoting philanthropic activities and offering tax relief to both the institutions and their donors.
Q2. What is the Finance Act, 2020, and what key change did it introduce regarding charitable institutions registered under Sections 12A, 12AA, and/or 80G of the Income Tax Act, 1961?
Ans. The Finance Act, 2020, mandated that charitable institutions already registered under Sections 12A, 12AA, and/or 80G of the Income Tax Act, 1961, were required to revalidate their registration.
Q3. What was the timeline for the implementation of the new registration procedure under the Finance Act, 2020?
Ans. Initially deferred due to the COVID-19 pandemic, the new registration procedure became effective from April 1, 2021. Existing institutions were obligated to submit applications for fresh registration within three months from this date, i.e., by June 30, 2021.
Q4. Who can benefit from the tax exemption under Section 12A of the Income Tax Act?
Ans. Section 12A offers tax exemptions to non-profit organizations such as charitable trusts, welfare societies, NGOs, and religious institutions, provided they obtain 12A certification. This applies to institutions registered before 1996 as well as those registered subsequently.
Q5. How does Section 80G of the Income Tax Act provide benefits?
Ans. Section 80G allows donors to claim tax deductions for contributions made to eligible charitable institutions and donations. While this registration doesn't directly benefit the institutions, it incentivizes donations by providing tax relief to contributors.

In India, charitable and religious institutions benefit from tax exemptions under Sections 12A and 80G of the Income Tax Act, 1961. These provisions are pivotal in promoting philanthropic activities by offering tax relief to both the institutions and their donors. However, the Finance Act, 2020, introduced significant amendments necessitating the revalidation of existing registrations under these sections. This article delves into the intricacies of these amendments, the revalidation process for Registration under 12A and 80G, required documentation, and the implications for charitable organizations.

Legislative Background: Finance Act, 2020

The Finance Act, 2020, introduced a mandate requiring charitable institutions registered under Sections 12A, 12AA, and/or 80G of the Income Tax Act, 1961, to revalidate their registrations. Subsequently, on March 26, 2021, the Central Board of Direct Taxes (CBDT) issued the Income-Tax (6th Amendment) Rules, 2021, detailing the procedure for fresh registration and specifying the necessary documentation for organizations under these sections.

Initially, due to the COVID-19 pandemic, the implementation of the new registration procedure was deferred to October 1, 2020, with charitable institutions required to reapply by December 31, 2020. However, further adjustments led to the new provisions becoming effective from April 1, 2021. Consequently, institutions and trusts holding existing registrations under Sections 12A, 12AA, and/or 80G were obligated to submit applications for fresh registration within three months from this date, i.e., by June 30, 2021, as stipulated in the Income-Tax (6th Amendment) Rules, 2021.

Section 12A: Tax Exemption for Charitable Institutions

Section 12A offers tax exemptions to non-profit organizations such as charitable trusts, welfare societies, NGOs, and religious institutions. By registering under this section, these entities can avail tax relief, acknowledging their role in social welfare rather than profit generation .

It's important to note that Section 12A applies to institutions registered before 1996, while Section 12AA pertains to those registered after 1996. Regardless of their legal structure—be it a society, trust, or not-for-profit company—NGOs must obtain 12A certification to benefit from tax exemptions.

Section 80G: Tax Deductions for Donors

Section 80G allows donors to claim tax deductions for contributions made to eligible charitable institutions. While this registration doesn't directly benefit the institutions, it incentivizes donations by providing tax relief to contributors .

Only NGOs registered under both Sections 12A and 80G are eligible to receive government funding. This dual registration ensures that the institution is recognized for its charitable purpose and that its donors can avail tax benefits.

While Section 12A registration exempts charitable institutions from paying income tax, Section 80G registration enables their donors to claim tax deductions, fostering a mutually beneficial relationship between the institutions and their supporters.

Procedure of Revalidation Under Section 12A and 80G

To claim tax exemptions under Sections 12A and 80G of the Income Tax Act, 1961, charitable and religious institutions, including NGOs, must undergo a revalidation process. This process involves submitting Form 10A online to the Principal Commissioner or Commissioner of Income Tax. Below is a step-by-step guide to the revalidation procedure:

Access the Income Tax E-filing Portal: Log in to the official Income Tax Department's e-filing website.
Go to Income Tax Forms: Under the 'e-File' tab, select 'Income Tax Forms'.
Select Form 10A: Choose 'Form 10A' from the list and select the relevant Assessment Year.
Prepare and Submit Online: Opt for the 'Prepare and Submit Online' mode.
Complete the Form: Fill in all required details and attach necessary documents.
Verification: Submit the form using an Electronic Verification Code (EVC) or Digital Signature Certificate (DSC), as applicable.

Documents Required for Revalidation of 80G and 12A

To ensure continued tax-exempt status and eligibility for donor deductions, charitable and religious organizations must revalidate their registrations under Sections 12A and 80G of the Income Tax Act, 1961. The revalidation process requires submission of specific documents that establish the organization's legal standing, financial integrity, and compliance with relevant laws. Below is a detailed list of the documents necessary for revalidation:

Self-Certified Copy of Incorporation Document: A certified copy of the trust deed, memorandum of association, or any other founding document that evidences the establishment of the society or trust.
Self-Certified Copy of Registration Certificate: A certified copy of the registration certificate issued by the appropriate authority, such as the Registrar of Companies, Registrar of Societies, Registrar of Firms, or Registrar of Public Trusts, depending on the nature of the organization.
Self-Certified Copy of FCRA Registration (if applicable): If the organization is registered under the Foreign Contribution (Regulation) Act, 2010, a certified copy of the FCRA registration certificate must be provided.
Self-Certified Copy of Existing Registration Order: A certified copy of the existing order granting registration under Section 12A, 12AA, or 12AB, as applicable.
Annual Accounts for the Past Three Years: Copies of the organization's annual accounts for up to three financial years immediately preceding the year in which the revalidation application is made. This requirement applies to existing entities.
Audit Reports Under Section 44AB (if applicable): If the organization's income includes profits and gains from business activities, or if it holds a business undertaking under the provisions of Section 11(4A), copies of the annual accounts and audit reports under Section 44AB for the past three financial years are required.
Self-Certified Copy of Modified or Adopted Objects: A certified copy of documents evidencing any modifications or adoptions of the organization's objectives.
Notes on Activities: A detailed note outlining the activities undertaken by the trust or institution, demonstrating its engagement in charitable or religious endeavors.
Darpan Registration Details (if registered): If the organization is registered on the DARPAN portal of NITI Aayog, details of this registration must be provided.

Ensuring the accurate and complete submission of these documents is crucial for the successful revalidation of registrations under Sections 12A and 80G, thereby maintaining the organization's tax-exempt status and enabling donors to claim applicable tax deductions.

Issuance of Certificate of Revalidated Registration under Sections 12A and 80G

Following the amendments introduced by the Finance Act, 2020, and effective from April 1, 2021, charitable and religious institutions seeking to maintain their tax-exempt status under Sections 12A and 80G of the Income Tax Act, 1961, are required to undergo a revalidation process. This process ensures that such entities continue to comply with the stipulated conditions for tax exemption and donor deductions.

1. Application and Processing Timeline

Upon submission of the revalidation application through Form 10A on the Income Tax Department's e-filing portal, the Principal Commissioner or Commissioner of Income Tax (PCIT/CIT) is mandated to process the application within three months. If satisfied with the application and accompanying documents, the PCIT/CIT will issue an order granting revalidated registration in Form 10AC. This order includes a 16-digit alphanumeric Unique Registration Number (URN), signifying the entity's compliance and eligibility for tax exemptions and donor benefits .

2. Validity and Renewal of Registration

The revalidated registration granted under Form 10AC is valid for a period of five years. To ensure uninterrupted tax-exempt status, organizations must apply for renewal at least six months before the expiry of the current registration. This subsequent application is to be made using Form 10AB. Upon review, the PCIT/CIT will issue an order in Form 10AD, which may grant renewal, reject the application, or cancel the registration, depending on the entity's compliance and activities.

3. Assessment and Potential Rejection

During the evaluation of both initial and renewal applications, the PCIT/CIT holds the authority to request additional documents or information to verify the genuineness of the organization's activities and adherence to legal requirements. If the assessing officer finds discrepancies or non-compliance, they may reject the application. However, such rejection can only occur after providing the applicant an opportunity to be heard. Rejection orders are also communicated through Form 10AC for initial applications and Form 10AD for renewals.

4. Importance of Compliance

Maintaining valid registration under Sections 12A and 80G is important for charitable and religious institutions to avail income tax exemptions and to enable donors to claim deductions on their contributions. Timely revalidation and adherence to the procedural requirements ensure continued eligibility for these benefits and uphold the organisation's credibility and compliance with the Income Tax Act.

Conclusion

The revalidation of registration under Sections 12A and 80G signifies an important move towards greater transparency and accountability in the charitable sector. Institutions must diligently adhere to the revised provisions to continue availing tax benefits and to uphold the trust of their donors. Timely compliance not only ensures uninterrupted operations but also reinforces the institution's commitment to genuine charitable endeavours.

Frequently Asked Questions (FAQs)

Q1. What is the significance of Sections 12A and 80G of the Income Tax Act, 1961, for charitable organizations?

Ans. These sections provide tax exemptions and deductions, respectively, which are crucial for promoting philanthropic activities and offering tax relief to both the institutions and their donors.

Q2. What is the Finance Act, 2020, and what key change did it introduce regarding charitable institutions registered under Sections 12A, 12AA, and/or 80G of the Income Tax Act, 1961?

Ans. The Finance Act, 2020, mandated that charitable institutions already registered under Sections 12A, 12AA, and/or 80G of the Income Tax Act, 1961, were required to revalidate their registration.

Q3. What was the timeline for the implementation of the new registration procedure under the Finance Act, 2020?

Ans. Initially deferred due to the COVID-19 pandemic, the new registration procedure became effective from April 1, 2021. Existing institutions were obligated to submit applications for fresh registration within three months from this date, i.e., by June 30, 2021.

Q4. Who can benefit from the tax exemption under Section 12A of the Income Tax Act?

Ans. Section 12A offers tax exemptions to non-profit organizations such as charitable trusts, welfare societies, NGOs, and religious institutions, provided they obtain 12A certification. This applies to institutions registered before 1996 as well as those registered subsequently.

Q5. How does Section 80G of the Income Tax Act provide benefits?

Ans. Section 80G allows donors to claim tax deductions for contributions made to eligible charitable institutions and donations. While this registration doesn't directly benefit the institutions, it incentivizes donations by providing tax relief to contributors.