Registration of trusts or NGOs

Charitable trust budget 2020 – In Budget 2020, a lot of changes have been made in the Income Tax Act regarding trusts and NGOs, including provisions related to the renewal of registration of trusts or NGOs.

The provisions related to the applicability of registration or renewal of trusts of Budget 2020 will now be applicable to all new and old trusts and NGOs with effect from 1st April 2021 due to further extension due to corona virus.

According to these changes, all the prescribed registered institutions will now have to re-register from April 1, 2021 and if the re-registration is not done, then these institutions will have to pay tax on their income and property .

In today's article (charitable trust budget 2020), we will discuss about the amendments made in the Income Tax Act regarding trust and other institutions in the budget 2020 .The provisions of Budget 2020 will be applicable to those institutions which are registered in the following section of Income Tax Act 1961 –
  • Section 12A/ 12AA
  • Section 80G
  • Section 10(23C)
If an organization is registered in any of these sections, then it has to apply for re-registration within 3 months from 1st April 2021 i.e. by 30th June 2021.

If these organizations do not apply for re-registration, then the registration of these organizations will be considered canceled and the exemption which they were getting in income tax will be withdrawn.

Till now the institutions registering under these sections had to register only once and this registration was effective till the registration was canceled by the Income Tax Department.

Amendments in budget 2020 (charitable trust budget 2020)

These institutions have to apply to the Principal Commissioner or Commissioner of Income Tax. Re-registration of these institutions will be done within 3 months from the end of the month in which the application has been made with the Commissioner.

No documents of any kind will be called from these institutions for re-registration, the only requirement will be that these institutions will have to apply for re-registration only.

Re-registration will be done in section 12AB. This registration will be effective for further 5 years, after the end of 5 years one has to apply for re-registration within 6 months.

While applying for re-registration after 5 years, any kind of records can be asked by the commissioner so that he can be satisfied with respect to the objects of the institute.

That is, it can be said that now after every 5 years, trusts or institutions will have to apply for re-registration.

What are the consequences if you do not apply for Re-Registration by 30 June 2021?

It will be mandatory for all old trusts or institutions to apply for re-registration by 30 June 2021.

If the application for re-registration is not made, then on June 30, 2021, the fair market value of the assets will be deducted from these trusts or institutions and the total liabilities will be deducted from it. After this, if there is a positive value of the assets, then it will be taxed at the maximum marginal rate .

All these provisions are mentioned in section 115TD of the Income Tax Act.

All trusts and institutions will have to apply for re-registration, whether these institutions are earning any kind of income or not.
What rules will be applicable in respect of newly registered trusts, NGOs or other institutions?

The concept of provisional registration for a new trust or institution has been introduced in Budget 2020.

If a person is registering a trust or institution for the first time under section 80G or section 12A or section 10(23C) of the Income Tax Act, then the first provisional registration will be issued to that person.

Provisional registration will be given for the next 3 assessment years, after which you will have to apply for regular registration.

One has to apply for regular registration within 6 months from the end of the provisional registration or within 6 months from the commencement of the activity of the trust or institution, whichever is earlier.

Necessary documents and information can be sought by the commissioner at the time of regular registration.

Whether the trust or institution has to file an annual statement regarding donation? (charitable trust budget 2020)

An institution registered under section 80G will have to file an annual statement every year, which will contain the details of donations received by that institution. If the annual statement is not filed by the institution, then there will be no income tax exemption for the donation given to the donor.

Or if the details of any donor are not there in the annual statement, then that donor will also not get the discount.

Along with this, the institution registered under section 80G will also have to issue a certificate to the donor, which will contain the details of the donation given by him.

If the annual statement is not filed by the institute in the prescribed form and time limit, then fee under section 234G will be charged on that institution.

This fee will be charged on the basis of Rs 200 per day. This fee will be charged till the annual statement is filed.

Apart from this, section 271K has also been added in the Income Tax Act 1961, in which the provisions of penalty have been mentioned.

According to section 271K, if an institution does not file an annual statement regarding donation, then a penalty of at least Rs 10,000 and a maximum of Rs 1 lakh will be imposed on that institution.

All these provisions will be applicable from 1st April 2021.

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