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Section 12 of the Income-tax Act talks about voluntary donations received by a trust for charitable or religious purposes will be income derived from the property held under the trust wholly for the purposes mentioned and can claim exemption following the conditions mentioned in section 11 of the Act.
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For several reasons, trust registration under Section 12 of the Income Tax Act is required:
Section 12AA talks about the registration of a trust made under Section 12 of the Income Tax Regulation
The Principal Commissioner has to take the following steps to register a trust created under Section 12 of the Income Tax Act:
A copy of such an order must be given to the applicant, and a reasonable opportunity must be given to the applicant in case of refusal of registration.
The following conditions are to be satisfied to claim an exemption under section 11:
Application of Income by Trusts Made Under Section 12 of Income Tax Guidelines
Application of income means spending of income by the assessee, and such amount must be included in the total income. The applied income is taxable in the possession of the assessee.
Application of Income is mentioned under Section 11 (1), and it includes:
Accumulated income is the net income retained by the corporation or the company over time, not distributed as dividends to the shareholders. The accumulated income in respect of trusts established under section 12 of the income tax act is the income accumulated for charitable or religious purposes.
Section 11(2) of the income tax act states that:
Section 11(3) of the income tax act states that:
If the accumulated income above 15% of the net income is not deposited or invested in the manner prescribed under section 11(5), the income ceases to accumulate income.
Forfeiture of Exemptions of the Trusts Made Under Section 12 of the Income Tax Act
Section 13 of the income tax act talks regarding the forfeiture of exemption of incomes of the trusts established under Section 12 of the Income tax act1.
Section 12 talks about a donation a trust receives for charitable or religious purposes will be income derived from the property held under the trust wholly for the purposes mentioned. They can claim exemption following the Act’s conditions mentioned in section 11.
The Income Tax Act of 1961’s Section 12A (1) (b) deals with the registration of trusts and organizations created for charitable purposes. Simply put, this section describes the requirements for registering organizations that work to benefit society and pursue charity goals.
Donors benefit from registering under Section 80G, while NGOs can register under Section 12A to receive tax exemption for their income under Section 80A of the Income Tax Act.
Under Section 12A of the Income Tax Act of 1961, non-profit organizations like charitable trusts, welfare societies, NGOs, religious institutions, and comparable entities are eligible for tax deductions.
Income received by a trust or institution established exclusively for charity or religious purposes in the form of voluntary contributions is subject to tax exemption.
An NGO needs to receive Section 12A certification to register under Section 80G.
Individuals who donate to an NGO can benefit from registration under Section 80G of the Revenue Tax Act. In contrast, Section 12A registration enables an NGO to get a tax exemption for its organizational revenue.
Read our article:Read Details About Section 13 of the Income Tax Act, 1961
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