Trusts enjoy income tax exemption under the Income tax Act. A trust that is registered under Se...
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.
The sections which have been amended are- Section 12A, Section 12AA, new section 12AB and amendment considering Income Tax Act, 1961 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 1st June 2020, whichever is later.
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:
It is essential to know the intention of the legislature before the amendment over the charitable trust organization.
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