Re-Registration of Trusts and NGOs from FY 2020-21 onward

According to the latest notification issued, all Section 8 companies, NGOs, charitable trusts etc require to register again with the Income Tax Authority within the time period of 3 months starting from 1st June 2020. All existing trusts or institutions which are registered under Section 12A or under Section 12AA of the Income Tax Act, shall be mandatorily required to frame new application and should obtain registration according to Section 12AB. Application has to be made within 3 months commencing from 1st June 2020. Principal Commissioner shall grant the registration by passing an order within a period of three months from the end of the month in which the application was received and this registration shall be valid for a period of 5 years.

In case the application for re- registration is not made within the specified time then already granted earlier registration shall stand cancelled on the expiry of 3 months i.e. 31st August 2020. After cancellation, trust or institution shall not be eligible for claiming exemption in respect of its income under section 11 of the Act.

According to section 115TD of the Act, such trust or institution shall be required to pay tax on the aggregate fair market value of the total assests of the trust or the institution shall be required to pay tax on the aggregate fair market value of the total assests of the trust or the institution as on 31st August, 2020 which exceeds the total liability of such trust on that date. The tax payable on such value shall be at the maximum marginal rate. Also, a trust or institution will be required to apply for re-registration at least six months prior to the expiry of the period of registration of 5 years.

Section 80G for all Trust & NGO 

It is important to note that all the trusts and NGOs which are already having 80G approval needs to take a re-approval within the period of 3 months starting from 1st June 2020. And this approval shall not be for perpetuity but it is valid for 5 years only and new approval to be taken at least 6 months before the expiry of the period of registration.

Reporting of all Donations by Income Tax Authorities

Deduction for donors is based only on return filed by trust, NGO’s hence it will be similar to 26AS TDS credit. It is mandatory for trust or institution registered under section 80G to file Annual Statement of Donation starting from 1st June 2020. In case of delay, late fee of Rs. 200 /day shall be applicable along with penalty of Rs. 10,000 to Rs. 1 lakh.

If any object is changed Re-registration is necessary

If the object clause of the trust or NGO has been changed in this case also you need to re-apply for Income Tax Registration within the period of 30 days of such modification starting from 1st June 2020. And if that object does not conform to the earlier conditions, then such trust need to apply for new registration within period of 30 days.

Cancellation of Trust Registration

Commissioner of Income Tax has the power to cancel any trust registration if the activities are not in accordance with the objects of the trust. So therefore if the trust are not genuine, then the trust is not eligible for exemption under section 11 or section 12 in view of the violation of section 13(1) of the Income Tax Act.

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