Charitable and religious organisations play an important and impactful role in India. They run and manage various schools, hospitals, relief programs, and many other social activities that help society to grow in a futuristic manner. To encourage such types of work, the government gives them various tax benefits under the Income Tax Act, 1961.
One of the key rules in this area is the provision of Section 12AB, which talks about the aspect of the registration of charitable and religious trusts, NGOs and similar types of institutions. This section came into effect on 1st April 2021, by replacing the old provisions of Sections 12A and 12AA.
The purpose of the Section 12AB is to make the registration process more transparent, structured, accountable, organised and time-bound. In this blog, we will explain what Section 12AB is, who needs to register, how the process works, its benefits and compliance requirements.
What is Section 12AB?
Section 12AB is about the registration of charitable and religious organisations with the Income Tax Department. Only those institutions that are registered under Section 12AB can claim exemption on their income under Sections 11 and 12.
Earlier, registration under Section 12A/12AA was permanent. Now, with Section 12AB, all organizations must apply for registration or re-registration, and this registration will be valid only for a fixed time.
The main reasons for bringing Section 12AB are:
- To have a single and uniform registration system.
- To make sure organizations get renewed registration every few years.
- To improve transparency and accountability.
Who Should Register Under Section 12AB?
The following must register under Section 12AB if they want tax exemption:
- Charitable or religious trusts
- NGOs (Non-Governmental Organizations)
- Non-profit organizations (NPOs)
- Societies and associations
- Section 8 companies under the Companies Act, 2013
Even if an organization is very small, it should register. Without registration, even genuine non-profits will have to pay tax on their income, which reduces the funds available for their charitable work.
Conditions for Registration
To qualify for registration:
- The organization must work only for charitable or religious purposes like education, medical relief, poverty relief, yoga, or public welfare.
- It should be non-profit in nature.
- Its income must be used for charitable purposes only.
- It should not distribute income or profits among members.
- Proper records and accounts should be maintained.
Registration Process Under Section 12AB
The registration process is fully online. Here are the steps:
Step 1: Filing the Application
- New or existing organizations must file Form 10A for fresh or re-registration.
- Renewal or modification of registration is done through Form 10AB.
- The forms are available on the Income Tax e-filing portal.
Step 2: Documents to be Submitted
- Trust Deed, Memorandum of Association, or Articles of Association.
- Registration certificate of society or company.
- PAN of the organization.
- Past 3 years’ financial statements (if applicable).
- Details of trustees, directors, or members.
Step 3: Verification by Authorities
The Income Tax Commissioner (Exemptions) will examine the application. If required, it may ask for the extra required documents or some clarifications.
Step 4: Grant of Registration
If satisfied, then the Commissioner grants registration under Section 12AB in electronic form.
Validity and Renewal
Unlike earlier permanent registration under Section 12AA, Section 12AB has fixed validity:
- Provisional Registration: New organizations get provisional registration for 3 years.
- Regular Registration: After the completion of 3 years of activities, the registration is given for a period of 5 years.
- Renewal: Application for the renewal of registration must be filed 6 months before the period of expiry.
This ensures that only the active and genuine organisations will be able to continue to enjoy tax benefits. The renewal system also allows the department to check whether the organization is still working as per its stated charitable objectives.
Benefits of Section 12AB Registration
- Tax Exemption – Income used for charitable purposes is not taxable.
- Eligibility for Grants/CSR – Many government bodies and companies require 12AB registration for funding.
- Credibility – It builds trust among donors and stakeholders.
- Donor Benefits (with 80G) – If the organization also has 80G approval, donors can claim tax deductions.
- Legal Compliance – Helps avoid penalties and ensures smooth functioning.
- Growth Opportunities – Registered entities are better placed to collaborate with international organizations or apply for foreign grants under FCRA, as registration demonstrates authenticity.
Compliance Requirements After Registration
Once registered, organizations must follow these rules:
- At least 85% of income should be applied to charitable activities in India.
- File annual return in Form ITR-7.
- If income is above the exemption limit, accounts must be audited by a CA.
- Maintain proper books, activity reports, and supporting documents.
- Funds must not be used for the personal benefit of trustees or members.
Non-compliance can result in cancellation of registration, leading to withdrawal of all tax benefits.
Difference Between Section 12AA and 12AB
| Particulars | Section 12AA (Old) | Section 12AB (New) |
| Validity | Permanent | 5 years (renewable) |
| New Entities | Direct registration | Provisional registration for 3 years |
| Process | Partly offline | Fully online |
| Transparency | Limited | Higher (re-registration required) |
What If You Do Not Register?
If an NGO or trust does not register under Section 12AB:
- It cannot claim exemption under Sections 11 and 12.
- Its income will be fully taxable.
- It may lose eligibility for government or CSR funding.
- Donors may also hesitate to contribute, as they will not get tax deductions under Section 80G.
So, applying for registration on time is very important for both the survival and growth of an organisation.
Conclusion
Section 12AB is a vital provision for charitable and religious organisations in India. It replaces the old permanent system with a more time-bound, transparent, and organised process.
For various NGOs, trusts, and societies, the process of registration under Section 12AB is not only necessary to save tax but also important for maintaining elements such as credibility, funding opportunities, and other legal compliance.
Organizations should:
- Apply for registration or renewal on time,
- Keep proper records and accounts,
- Ensure income is used only for charitable purposes.
By doing so, they can easily continue to receive the various tax benefits and serve society in a productive and effective manner.
To summarize, the provision of Section 12AB is the key to tax exemption and credibility for the charitable institutions, but it also demands the element of discipline and accountability. With the help of careful planning and compliance, charitable organisations can easily focus on their true purpose, which is serving society and improving the lives of various people.
