Effect Of Budget 2020 On Charitable Trusts Under Section 12AA

Effect Of Budget 2020 On Charitable Trusts Under Section 12AA
  1. Revalidation Of Existing Registrations:

The revalidation process will be computerized. The form online will specifically focus on the genuineness of the activities of trusts. After the types are available online, the trusts will have a period of 3 months to submit the application form for registration. After registration, the institutions or beliefs will have to apply for renewing their registration at least six months before the 5-year registration expires. 

  1. Registration For New Institutions:

For institutions and trusts that have been newly established or for institutions and beliefs that are applying to the income tax department for registration for the first time will not be given a registration effective for five years. Instead, these new institutions and trusts will be granted registration of provisional nature, which will stay valid for three years. The applications that are pending before the Principal Commissioner of Income Tax (PCIT) without the order approving the registration being passed yet will be considered or labeled as new organizations. Such organizations will only receive a provisional registration valid for three years on applying to be registered. After receiving temporary registration for three years, such institutions and trusts, have to apply for renewal of registration at least six months before the provisional registration valid for 3 years, has expired. On applying within the validity period of the temporary registration for renewal, these new institutions and trusts will no longer receive a temporary registration. They will then receive a registration that will stay valid for five years. 

  1. National Register And UIN

Another significant change that has been proposed by the Budget of 2020 suggests that the government can create a national register. This national register created by the government will be created for the charitable institutions and trusts. The Income Tax Department will be responsible for providing every registered trust and institution with an identification number unique to every charitable trust and institution. 

  1. Either 12AA Or 10(23C)

The charitable institutions and trusts can no longer stay registered under both section 12AA as well as 10(23C). They can either be registered under section 12AA or section 10(23C).

  1. Additional New Compliance

This proposed change is concerning section 80G. The trusts or institutions having registration under section 80G will need to submit a statement regarding the details of the donations that they have received according to the guidelines provided under the same section. Based on the information provided by such institutions about the details of the donations they have received, they will be able to utilize the benefits of section 80G. Additionally, the donors who choose a reduced tax rate will not be able to avail of tax deduction benefits under this section.