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Charitable Trust Registration Under Income Tax Act- What are the Eligibility Criteria?

Charitable Trust Registration Under Income Tax Act- What are the Eligibility Criteria?

The income tax law has explicit provisions when it comes to charitable and religious organisations' Registration. Such organisations have been provided exemption from the income tax provided they have obtained registration under the law. Further, donors of Charitable Trust organisations are provided with a deduction for the amount of donations made provided the organisation has obtained registration under Section 80G.

Therefore, registration of trust under the income tax act provides a bouquet of benefits to these organisations. However, charitable and religious organisations need to meet certain eligibility criteria in order to obtain registration. What are these criteria? Let’s find out!

Eligibility Criteria for Charitable Trust Registration

Before discussing the eligibility criteria for obtaining a charitable trust registration Certificate, we need to understand what is the meaning of charitable purpose. As per the income tax law, charitable purpose means relief of the poor, education, yoga, medical relief, preservation of the environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.

However, the ‘advancement of any other object of general public utility’ shall not be considered as a charitable purpose if it involves activities in the nature of commerce, trade or business or provision of any service for fees or consideration. However, if such activity is actually carried out for the advancement of any object of general-purpose utility and the aggregate receipts from such activity does not exceed 20% of the total receipts of the trust or institution undertaking such activity, then it shall be considered as a charitable purpose.

Now, let’s discuss the eligibility criteria for Charitable Trust Registration Certificate that an applicant shall adhere to:

  • Any charitable institution formed as a trust, society or Section 8 company is eligible to get registered as a charitable organisation under the income tax law.
  • If such institution is private or family trust, then it shall not be eligible for getting registered under section 12A of the income tax act. The activities of the assessee should be genuinely for the benefit of the public.
  • Such an institution can be either a religious institution, charitable organisation or any other welfare organisation.
  • A charitable organisation becomes eligible for getting registered under the income tax law immediately after its formation. However, it is not mandatory to obtain registration under the income tax immediately. There is no time limit within which a charitable organisation shall apply for Section 12A registration. A charitable organisation can get registered even 3 years after its formation if it is willing to obtain exemptions under the income tax.
  • The objects of the trust shall be in the nature of charitable purpose.

Any charitable organisation willing to obtain registration under the income tax act shall make an application for registration to the Principal Commissioner or Commissioner of Income Tax in Form No. 10A.

Further, donors of an organisation can claim a deduction for donations made to charitable organisations. However, such charitable organisation shall fulfil the conditions prescribed under Section 80G(5) including the following:

  • The income derived by such organisation is not includible in its total income (i.e., it is exempted from tax as per the provisions of Section 11 and 12)
  • The instrument under which such organisation was created does not contain any provision for application or transfer of income or assets for a purpose other than the charitable or religious purpose
  • The trust or the institution is not expressed to be for the benefit of any particular religious community or caste
  • The trust or the institution maintains regular books of accounts of its income and expenditure
  • The institution is constituted either as a public charitable trust or a society registered under Societies Registration Act 1860 or Section 8 company or a University established by any law or any educational institution etc.
  • The institution or trust furnishes Form 10-BD to the income tax authority containing details of donors and the donations made.
  • The trust or the institution furnishes a certificate to the donor specifying the amount of donations made, manner of donations made, date of receipt of donations and such other particulars as may be prescribed.

Benefits of Registration Under Section 12A and 80G of the Income Tax

Following are the benefits of getting registered under Section 12A and 80G of the income tax act:

  • The income will be exempted from tax as per the provisions and conditions of the income tax law.
  • The exemption on income can also be availed if the income is accumulated for a specified purpose subject to certain conditions.
  • The donors can claim a deduction of the donations made to the charitable organisation.
  • A trust registered under Section 12A and 80G creates a sense of trust among the donors.

Following were the explicit conditions under various provisions of the income tax law surrounding registrations and exemptions for charitable and religious institutions. Once you satisfy the eligibility criteria for trust registration, you can proceed with the trust registration process. In case of any query in relation to the Charitable Trust Registration Certificate of trust under the income tax act, please feel free to contact the ASC Group.


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