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Form 10AB of the Income Tax Act: A Comprehensive Overview
If you run a charitable trust in India, you will surely want to stay on top of tax laws applying to your entity. Since a charitable trust is different from a business, it is treated differently from a tax perspective. A new provision introduced by the Finance Act, 2020 states that all existing trusts in the country need to register under Section 12A and 80G and re-approval under Section 10(23C) and Section 35(1).
A new section 12AB came into effect on 1st April 2020 to facilitate the registration process. Before this act was implemented, section 12AA or under section 12A provided guidelines for the process. However, after 1st June 2020, the IT Department provided a Unique Registration Number to charitable trusts and religious institutions to create a National Database. Additionally, the new law brings forth the concept of provisional and permanent registration.
Form 10A is to be used for the first application (provisional registration or permanent registration). Likewise, Form 10AB applies to subsequent applications for renewal or permanent registration. In this article, we will provide a comprehensive overview of Form 10AB.
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Form 10AB Of Income Tax Act for Trust: Understanding A Trust
Since 10 AB applies to charitable trusts, you should understand the meaning of a trust in the first place. In India, this entity is of two types: public and private trust and they may be religious or charitable. Further, there are government-backed statutory trusts and quasi-government bodies (managed privately but supported by the government). NPOs and NGOs as one of the following:
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Charitable trusts
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Societies
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Section 8 companies formed to promote charity, art, science, religion, trade, environment protection, sports, social welfare, and research
NPOs/ NGOs, trusts, funds, hospitals, universities, and educational institutions get tax exemption under sections 10(23C), 12A, 12AA, 35, and 80G subject to certain conditions.
Registration of Trusts
Before the Finance Act, 2020 came into action, a trust, institution, or NPO/ NGO held lifetime validity once registered unless the Income Tax Department canceled it. However, after the introduction of this act, the registration system changed a lot. It was made completely electronic and each applicant now gets a unique registration number (URN). Further, new application formats and rules have been enforced for these bodies from April 1, 2021.
Changes under the Finance Act, 2020
Trusts, institutions, and NPOs/ NGOs earlier having a tax exemption under Sections 10 (23C), 12A, 12AA, 35, or 80G must reapply for the same and get a new registration under Section 12AB. Additionally, Section 12AB provides for tax exemption, grants from government or foreign agencies, and Foreign Contribution (Regulation) Act (FCRA) applications to get international funding. The new concepts of provision and permanent registrations also apply. Here are the details of both types of registrations:
Provisional Registration
Existing trusts or institutions seeking registration under Section 12AB get a provisional registration. For this process, Form 10A has to be duly filed for a first-time application. Section 12AB applies for provisional registration for trusts seeking fresh registration. The form has to be filed a month before the commencement of the previous year when the trust’s charitable activities have to be started. Notably, provisional registration is granted for a period of three years.
Permanent Registration (Renewal of Provisional Registration)
After receiving the provisional registration, trusts or institutions should apply for permanent registration. This is done by submitting Form 10AB for trusts and charitable institutions. This should be done at least six months before provisional registration expires or six months after the commencement of the trust’s charitable activities (whichever is earlier). In this case, registration is granted for a period of five years. Re-registration is needed at least six months before the end of this five-year period.
Form 10A of the Income Tax Act
Before digging deep into the structure and function of Form 10A, we will explain Form 10A. This form is for provisional registration and applies to the following:
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All trusts and institutions already registered under the earlier law (before 1st April 2021)
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All funds/funds/institution or any university/ educational institution/ hospital/medical institution in sub-clause (iv)/(v) /(vi) or section 10(23C) approved under the first provision
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Trusts/institutions registered under section 12A or 12AA
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Institutions/funds approved under clause (vi) of section 80G(5)
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Universities/colleges/research associations/other institutions referred to a clause (iii)
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Companies referred to in clause (iia) of section 35(1)
Likewise, all trusts and institutions that are not already registered under the previous law and want to get registered for exemption must use Form 10A to apply for first-time Registration or Approval. They should apply at least one month before the commencement of the financial year from which they seek registration.
Form 10AB of the Income Tax Act
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Form 10A is used at the time of the registration or approval of a trust, institution, or NGO for the first time. It means it is used just once in the lifetime, following which Form 10AB is required for subsequent renewals. The new Form 10A is used only once in the lifetime of the trust, institution, or NGO for registration or approval for the first time.
In the case of subsequent renewals, Form 10AB would be required. Form 10AB is essentially a mandatory form for charitable trusts and organisations seeking tax benefits under Section 10(23C), 12A, or 80G. It requires detailed information about the trust or organisation, specifically, its activities and financials.
Form 10AB Applicability
Here are the basics of the applicability of Form 10AB of the Income Tax Act:
All trusts and institutions with permanent registration or approval must make an application in Form 10AB after five years, which is the approval period of initial registration.
All trusts and institutions with provisional registration for a period of three years will have to apply with Form 10AB within 6 months after the commencement of their activities. These organisations can get permanent registration only after making an application with Form 10AB. Trusts and institutions should apply again at least 6 months before the expiry of the three-year provisional registration period if the activities have not commenced.
Notably, Form 10AB is common for all trusts and institutions. Provisional registration is valid only for three years, and it does not get extended automatically. It means this form should be filled out on time.
How to File Form 10AB
Whether you want to apply for first-time registration or have provisional registration and want to get permanent registration, you need to fill out Form 10AB. Here are the key steps to file Form 10AB:
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Log on to the official e-filing portal https://www.incometax.gov.in/iec/foportal of the Income Tax Department through its websites
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Navigate to Income Tax Forms and check the e-file tab to access ‘File Income Tax Forms’
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From the drop-down list, choose ‘Form 10AB’ and the relevant assessment year
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Fill in the requisite details in the form and attach the necessary documents (which are similar to that of Form No. 10A)
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Provide digital signatures or EVC as required during the furnishing of the return and submit the form
The process is simple and hassle-free because you can complete it online in only a few clicks.
Timelines for Filing Form 10AB
New trusts applying for fresh registration for a specific financial year should apply for it with Form 10AB one month before the commencement of the financial year. However, trusts and organisations converting their provisional registration to final registration will have to follow these guidelines:
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At least six months before the provisional registration expires
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Within six months of the beginning of charitable activities
Documents Required for Filing Form 10AB
Here is a list of documents you should have at hand while filing Form 10AB. These include self-certified copies of:
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The instrument creating or establishing the applicant, where the applicant is created or established using one
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The document proving the creation or establishment of the applicant where the applicant is created or established, otherwise than under an instrument
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Registration with the Registrar of Public Trusts, Registrar of Companies, or Registrar of Firms and Societies
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Registration under Foreign Contribution (Regulation) Act, 2010 (applicant is registered under such Act)
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Existing order granting registration under sections 12A, 12AA, or 12AB
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Order of rejection of application for registration under section 12A12AA, or 12AB
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Annual accounts of the applicant relating to the prior year or years (not more than 3 years immediately preceding the year of application) for applicants in existence prior to the financial year in which the application is made
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Annual accounts of business undertaking relating to the prior year or years (not more than 3 years immediately preceding the year of application) and audit report as per the provisions of section 44AB where a business undertaking is held by the applicant according to the provisions of sub-section (4) of section 11
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Annual accounts of business undertaking relating to the prior year or years (not more than 3 years immediately preceding the year of application) and audit report as per the provisions of section 44AB where the applicant’s income includes profits and gains of business according to the provisions of sub-section (4) of section 11
Frequently asked questions
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What is Form 10AB?
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Form 10AB refers to a mandatory form that trusts and charitable organisations need to fill to claim tax benefits under Section 10(23C), 12A, or 80G of the Income Tax Act. The form requires details regarding the activities and financials of an organisation or trust.
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Who can use Form 10AB?
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Form 10AB is applicable to trusts and charitable institutions rather than general businesses running for profits.
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When is Form 10AB required to be filed
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Form 10AB has to be filled a minimum of six months before the provisional registration expires or within the commencement of charitable activities (whichever is earlier). The validity of registration is five years.
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What is the process of filing Form 10AB?
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The process of filing Form 10AB is quite straightforward. You can do it online with a few steps by accessing the e-filing portal online. However, seeking advice from an expert makes sense because you need to fill in the details correctly and attach the right documents to complete the process without errors.
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Do trusts, institutions, or NGOs registered earlier need to register under Form 10AB?
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Yes, all trusts, institutions, or NGOs have to undergo the filing process with Form 10AB because it is mandatory.
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Is Form 10AB activated at the income tax portal?
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Yes, Form AB is activated on the income tax portal, which means you can quickly fill it in a few clicks.
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Are the documents for Form 10A and Form 10AB different?
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No, you require the same set of documents for both forms. These include the Registration Certificate, Trust Deed, FCRA certificate, and 10 (23C) approval/ rejection order. You also need to provide an annual account of the preceding three years (along with a 44AB audit report in some cases).
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When can a charitable trust, institution, or NGO apply for fresh registration?
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A charitable trust, institution, or NGO has to apply for new registration filed one month before the commencement of the year in which the charitable activities have to begin.
This comprehensive guide covers almost everything about Form 10AB of the Income Tax Act to be followed by charitable trusts and organisations. However, you may still have some doubts, questions, and concerns regarding the documentary requirements and timelines for the registration process. Consulting a tax specialist is the best way to address them and get additional advice to ensure a smooth journey for your organisation.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
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