Trust

How to Register a Religious charitable trust organizations?

In this article, we discuss how to register a religious charitable trust organization. A religious charitable trust is registered with a document which is called the Bill of Rights. Charitable Trust Organizations are bound to create trust in the institution between the authors or settler with trustees. The trust bill includes the things related to trust- its operation, guardian information, rights and duties of the guardian. The trust must be registered with the registrar or sub-registrar office according to the country’s laws.

It is pertinent to mention these organisations have been amended as per the Finance Budget 2020. The amendments were brought by Mrs. Nirmala Sitaraman and are effective from 01 June 2020. In the given Union budget of 2020, certain exemptions have been proposed against the charitable trust organizations. The amendment was concerning Section 12AA, 80G, and 80GGA and new section 12 AB has been inserted.

Amendments related to Charitable trust Organizations

The sections which have been amended are- Section 12A, Section 12AA, new section 12AB and amendment considering Income Tax Act, 1961^[1] under section 80G.

What is Section 12 A?

Under section 12 A for the charitable trust organization, the main point is that it was for the existing charitable trust organizations that can take 100 per cent of the exemption under Income Tax. All organizations registered can take basic exemptions under Income Tax. Here the organizations registered under section 8 are eligible to get Registration. Section 12A does not cover private trust or family trust.

 What is section 12AA- as per amendment?

If granted, the Registration of the charitable trust organization shall remain in force till it is cancelled by the Principal Commissioner. The organizations registered under section 12AA shall not be granted exemption under section 10 of the Act. As per the amendment, that exemption under section 10(46) shall be allowed to an entity, only if there has been Registration under section 12AA. The organization’s Registration shall become inoperative when the entity has been approved under section 10(23C)/ (46) or 1^st June 2020, whichever is later.

Registration Procedure of Charitable Trust Organization

It can be observed form the amendment in the Finance Act, 2020 that a new section has been inserted under Income Tax Act, 1961. A new section 12AB has been added, and procedure for the Registration is present below.

Registration Procedure for Charitable trust Organizations are as follows:

1. Application- An application has to be made to the Principal Commissioner, as per the conditions stated in Section 12A (1) (i) to (iv).
2.  Time Limit for Registration- The Registration for the charitable trust organizations shall be granted for 5 years. The new Registration shall be granted within three months of the application.
3.  Approval by CIT– The Registration shall be approved for 5 years only if the Commissioner of Income Tax (CIT)  is satisfied.  CIT shall have the power to call upon the documents or any information from the trust or institution to make inquiries before the renewal of Registration after five years.
4. Grant of New Registration– The new Registration of charitable trust organization shall be granted within a time of six months when the application has been made.
5. Cancellation of Registration– Before registration is cancelled, the trust organization will be given an opportunity to be heard.
6. Provisional Registration- For new entities, the Registration shall be granted for three years from the date of assessment year from which the Registration is sought.
7. Pending Application Registration- All the pending applications under section 12AA, on 1^st June 2020,  shall be sought to be filed or assumed to be registered under Section 12A(1) (ac)(vi).

Purpose of Amendment for the Charitable Trust Organizations

It is essential to know the intention of the legislature before the amendment over the charitable trust organization.

1. Section11– The section speaks about the grant of exemption regarding income derived from property held under trust for charitable purposes, or religious purposes.  The income accumulated during the previous year has to be either applied or accumulated according to the provisions of Section 11, 12, 12A, 12AA and 13 of the Act.
2. Section 11 (7)- The amendment of 2015, the charitable trust organization under section 12 AA or 12A, as stood by finance act, 1996, and said Registration in force of the previous year. If this is the case then exemption under section 10 is not allowed.
3. Approval period revision- It has been adjudicated in the judgments and realized by the legislators that the Registration or notification for exemption should be for limited period. The period should not be exceeding 5 years. This would create a non-adversial regime by not conducting an inquiry in the affairs of the exempt entities on day to day basis. They would be visiting the concerned authorities only for the renewal of Registration. This acts as surveillance for new or exempted entities.
4. Genuineness of the activities- To check the activities of the organization.
5. Compliance- Complianceof the legal formalities is strictly followed.
6. Provisional certification– it has been granted to avoid obstacles in the path of starting charitable activities.

Conclusion

It can be concluded that trust registration was amended in 2020. The reason for the amendment is to simplify the process and to stop corrupt practices occurring in charitable trust organizations. The period of exemption is 5 years. It implies that every five years the charitable trust organization will have to renew it. It allows the authorities to ensure adherence of the compliances and the exemption for which the trust organization has been formed. This amendment has broadened the scope of vigilance for the authorities under the Income Tax Department.

Read our article:Trust Registration Process in India