Trust & NGO Taxation

Section 12A of the Income Tax Act 1961 was the original registration provision for charitable and religious trusts. The Finance Act 2020 introduced Section 12AB as a new, time-bound registration regime effective from 1 April 2021, replacing Section 12A for most purposes. All new trusts seeking tax exemption on their income must apply under Section 12AB in Form 10A on the income tax e-filing portal; the Commissioner of Income Tax (Exemptions) grants provisional registration for three years and full registration for five years after verification. Trusts that held valid Section 12A registration prior to the cut-off date were required to migrate to Section 12AB by re-applying; failure to re-register results in denial of exemption under Section 11 of the Income Tax Act 1961.

Under Section 11(1)(a) of the Income Tax Act 1961, a registered trust or institution must apply at least 85% of its income derived from property held under trust to charitable or religious purposes in India during the relevant previous year. If the trust applies less than 85%, the unapplied income is taxable at the maximum marginal rate. The trust may claim accumulation of up to 15% without any approval, but for accumulation beyond 15% for a specific purpose, Form 10 must be filed within the due date of filing the return under Section 11(2). Such accumulated income must be applied within 5 years, and the purpose must be a charitable one under Section 2(15) of the Income Tax Act 1961 — general public utility purposes face an additional commercial activities cap.

Yes. A trust or NGO approved under Section 80G of the Income Tax Act 1961 can issue donation receipts that allow corporate donors to claim a deduction of 50% of the donation (subject to 10% of adjusted gross total income limit) under Section 80G(1). Approval is sought in Form 10G filed online before the Commissioner of Income Tax (Exemptions). From AY 2022-23 onwards, approved institutions must file a Statement of Donations (Form 10BD) annually and issue a Certificate of Donation in Form 10BE to each donor — the donor can claim deduction only on the basis of this certificate and the PAN of the institution. The 80G approval is now linked to Section 12AB registration, so a trust must first obtain or renew its 12AB registration before applying for or renewing 80G.

Donations and grants received by a charitable trust are generally not subject to GST because a pure donation — given voluntarily without expectation of a specific supply in return — does not constitute 'consideration' for a supply under Section 2(31) of the CGST Act 2017. However, if the trust provides any specific benefit to the donor in exchange (e.g., naming rights, sponsored events, or specific services), that portion may be treated as a taxable supply of service liable to GST at the applicable rate. Corpus donations specifically designated by the donor are not income under Section 11(1)(d) of the Income Tax Act 1961 and carry no income tax liability either. Trusts should maintain a clear donation receipt format distinguishing corpus from general donations to preserve both the GST and income tax positions.

A registered trust must file its income tax return in ITR-7 under Section 139(4A) of the Income Tax Act 1961 by 31 October (if liable for audit) or 31 July of the assessment year. Under Section 12A(1)(b), the trust must get its accounts audited in Form 10B (or Form 10BB for institutions registered under Section 10(23C)) if total income before exemptions exceeds ₹2.5 lakh. The trust must also file Form 10BD (Statement of Donations) by 31 May and issue Form 10BE certificates to donors by 31 May. Additionally, if the trust intends to accumulate income beyond the current year, Form 10 (notice of accumulation) must be filed before the return due date. Non-filing or delayed filing can trigger cancellation of registration under Section 12AB(4) or Section 80G.