Recent Changes in the Registration & Approval Scheme of NGOs and Analysis of CBDT
Circular No. 6 of 2023 dated 24-05-2023
speakers: adv. (dr.) manoj fogla
Date: 28 June 2023
TIME: 11.30 AM TO 01.00 PM
CA. SURESH KUMAR KEJRIWAL
CA. TARUN KUMAR MADAAN
PART 1: Amendments by the Finance Act 2023
1. Overview of Registration Scheme under the Income-tax Act
2. Registration or approval based on the commencement of activities
3. Giving incomplete, false or inaccurate information in the registration application
4. Withdrawal of retrospective benefit of exemption under Section 11/12
5. Non-filing of application for re-registration or renewal of registration
PART 2: Circular No. 6 of 2023 dated 24-05-2023
1. Relaxation by CBDT Circular No. 6 of 2023 dated 24-05-2023
2. Clarification on the effective date of Provisional Registration/Approval
3. No relaxation to convert Section 80G provisional approval to regular approval
4. Question & Answer Session
▸ NGOs are required to get registered under section 12A/12AA or to obtain approval under section 10(23C) to claim various exemptions and under Section 80G to provide deductions to donors.
▸ New section 12AB replaced section 12AA. Similar amendments have been made to Section 10(23C) and Section 80G. These changes were made effective from 1st April 2021. ▸ Registration and approvals of NGOs made completely electronic, under which a 16 digit URN shall be issued to all new and existing charity institutions.
▸ NGOs registered prior to 01-04-2021 are required to make an application again under new scheme of registration.
▸ Concept of perpetuity of registration is withdrawn under the new scheme. The registration under new scheme shall be valid for a specified period, that is, up to 3 years for provisional cases and maximum period of 5 years for final registration.
▸ Registration is required to be renewed after every 5 years.
▸ Concept of provisional registration introduced for charity institutions which are applying for the first time.
The new registration scheme provides that the trusts or institutions applying for first-time registration must make the application in two stages.
In the first stage, the application is filed in Form 10A for provisional registration. This application has to be filed at least 1 month before the commencement of the previous year relevant to the assessment year from which the registration is sought.
In the second stage, this provisional registration has to be converted into regular registration. This application for conversion has to be filed in Form 10AB at least 6 months before the expiry of the provisional registration period or within 6 months of the commencement of its activities, whichever is earlier.
Difficulty:
If a trust or institution has already commenced the activities, it is still required to apply for two registrations (provisional and regular) simultaneously.
W.e.f. 01-10-2023, only those trusts and institutions shall file an application for provisional registration that has not commenced its activities.
▸ The trust or institution need not apply for provisional registration if it has commenced activities.
Trusts or institutions can apply directly for regular registration without applying for provisional registration:
▸ Condition 1: Commencement of activities: A trust/institution that has already commenced its activities.
▸ Condition 2: No exemption has been claimed under Section 10(23C)/11/12: No income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of Section 10(23C)(iv)/(v)/(vi)/(via), or Section 11 or Section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.
Amended Form 10A w.e.f. 01-10-2023 [Income-tax (Eleventh Amendment) Rules, 2023 dated 23-06-2023]
“I _,son/daughter of ,hereby declare that the details given in the form are true and correct to the best of my knowledge and belief. I undertake that I am applying for registration/approval (strike out whichever is inapplicable) under the section code 2/7/ 8/9/10/12 and the activities of the …………… ( Name of the institution, trust or fund) having permanent account number (PAN)………….. have not commenced on or before the date of making this application. I further undertake to communicate forth with any alteration in the terms of the trust/society/nonprofit company, or in the rules governing the Institution, made at any time hereafter. I also declare that I am filing this form in my capacity as………….(designation) having PAN…………..and that I am competent to file this form and verify it.
Amended Form 10AB w.e.f. 01-10-2023 [Income-tax (Eleventh Amendment) Rules, 2023 dated 23-06-2023]
“I _,son/daughter of ,hereby declare that the details given in the form are true and correct to the best of my knowledge and belief. I undertake that I am applying for registration/approval (strike out whichever is inapplicable) under the section code 4A/12A/12B/12C/12D/ 14A having commenced activities on dd/mm/yyyy and also that no income or part thereof of the …………… (Name of the institution, trust or fund) having permanent account number (PAN)………….. has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) of clause (23C) of section 10 or section 11 or 12 for any previous year ending on or before the date of making this application on dd/mm/yyyy, at any time after the commencement of such activities. I further undertake to communicate forth with any alteration in the terms of the trust/society/non- profit company, or in the rules governing the Institution, made at any time hereafter. I further declare that I am filing this form in my capacity as _(designation)having PAN and that I am competent to file this form and verify it
Provision: The timeline to submit Form 10AB is six months from the start of charitable activities or at least six months prior to the date of expiry of the period of provisional approval, whichever is earlier.
FACT: In the case where more than six months have already expired since the commencement of charitable activities at the time of making the application for provisional approval :
Issue: What shall be the due date for submitting Form 10AB?
For institutions that apply directly for regular registration, there is a condition that no exemption has been claimed under Section 10(23C)/11/12.
What shall happen to organisations whose approval/registration was cancelled at any time in the past?
GIVING INCOMPLETE, FALSE OR INACCURATE INFORMATION IN the REGISTRATION
Pre-Amendment Provisions:
▸ Cancellation proceedings can be initiated if the PCIT/CIT has noticed the occurrence of a specified violation and the violation need not be noticed only on assessment
▸ If the registration has been obtained on incomplete or false, or incorrect information, the CIT has the power to cancel the registration after giving an opportunity of being heard. [Rule 17A(6)] the registration for the said assessment year.
Amendment [From AY 2023-24]:
Clause (g) in Explanation to Section 12AB(4):
After this amendment, “specified violation” shall also include the case where the application referred to in Section 12A(1)(ac) is not complete or it contains false or incorrect information.
Withdrawal of retrospective benefit of exemption under Section 11/12
Pre-Amendment Provisions:
▸ The exemption under Sections 11 and 12 shall be available for the assessment year for which assessment proceedings are pending before the Assessing Officer as on the date of such registration.
▸
Assessing Officer shall not take any action for reopening of an assessment for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the Registration.
Amendment [From 01-04-2023]:
The Finance Act 2023 has omitted the second, third and fourth proviso to Section 12A(2). Thus, the benefit of exemption provisions under Section 11/12 shall not be available for the earlier years.
What will be Hardships to NGOs after the omission of second, third and fourth provisos to Section 12A(2)?
NON-FILING OF APPLICATION FOR RE-REGISTRATION OR RENEWAL OF REGISTRATION
Pre-Amendment Provisions: As per the new registration requirement:
▸ Every existing registered organisation under section 12A / 12AA need to re-register
▸ The re-registration shall be valid for 5 years & thereafter, this is again to be renewed
▸ Once the provisional registration is granted, one needs to convert it into regular registration
Amendment [From AY 2023-24]:
Trust or institution registered under Section 12AB or approved under Section 10(23C) shall be deemed to have been converted into any form not eligible for registration or approval in the previous year:
▸ It fails to make an application for re-registration/re-approval;
▸ It fails to make an application to convert provisional registration/approval to regular registration/approval; or
▸ It fails to make an application to get the renewal of registration/approval within the specified period. In such cases, the conversion date shall mean the last date for making an application for registration or approval expires.
▸ Application for re-registration/ re-approval by existing registered/approved organisation before 01-04-2021 is to be filed. [Section 12A, Section 10(23C) and Section 80G]
▸ The time limit to file a re-registration application has been extended multiple times; the latest extended due date was 25-11-2022.
▸ If no application is filed by 25-11-2022, then such organisation shall be subject to accreted tax under Section 115TD.
▸ Application for conversion of provisional registration to normal registration shall be made within 6 months of the start of the charitable activity or at least six months prior to the date of expiry, whichever is earlier.
▸ For cases where the last date expired on or before 30-09-2022, the date to file Form 10AB was extended up to 30-09-2022.
▸ If no application is filed after 30-09-2022, then such organisation shall be subject to accreted tax under Section 115TD.
Amended Section 115TD provides for the levy of accreted tax if trusts fail to make an application for re-registration/re-approval; what if such trust has shifted from registration under Section 12A or approval category of Section 10(23C) to the nonapproval category due to receipts below Rs. 5 Crores?
If an existing organisation registered under section 12A has by default granted provisional registration and this provisional registration has also been regularised and converted to 5 years registration:
▸ Whether 115TD shall apply in such case, on the technical ground that fresh reregistration has not been made for five years?
No. 6 of 2023 dated 24-05-2023
Application for Re- registration/ Re-approval by existing registered/approved organisation
TIME LINE
From 01/04/2021 to June, 2022
Then extended upto March, 2022
Then extended upto 25/11/2022
If no application is submitted, then -
i) the organisation shall be subject to Accreted Tax u/s. 115TD
ii) Date of default shall be 25/11/2022
Application for new cases for provisional registration/approval
Apply for normal registration within 6 months of start of charitable activity or at least six month prior to date of expiry, whichever is earlier
TIME LINE
For cases where last date was expired on or before 30/09/2022
Then extended upto 30/09/2022
Where application made after the extended deadline i.e. 30/09/2022, then -
i) the organisation shall be subject to Accreted Tax u/s. 115TD
ii) Date of default shall be 30/09/2022
Relief to get re-registration / re-approval to an Existing Organisation (Form 10A)
12AB/10(23C)/80G (Form 10A)
Where no application for Re-registration/re-approval has been made so far
i) Submit fresh application until 30/09/2023
ii) For re-registration 12AB / reapproval under 10(23C)/80G
Applied for provisional registration/approval after missing the deadline of 25/11/2022
Surrender provisional registration/approval
i) Submit fresh application until 30/09/2023
ii) For re-registration 12AB and Reapproval under 10(23C)/ 80G
i) Registration/approval shall be granted for 5 years
ii) No Exit Tax in such cases
i) Registration/approval shall be granted for 5 years
ii) No Exit Tax in such cases
Clause 8 of the Circular provides –
“
It is also clarified that where trusts have missed the deadline of 25.11.2022, as mentioned in para 1(a) above, for making an application for registration/approval in Form No.10A, and have subsequently furnished Form No.10A seeking provisional registration/approval” shall surrender and apply for five year registration /approval.
Clause 1(a) of the Circular provides –
“due date for filing Form No.10A in such cases to 31.08.2021 vide Circular No.12 of 2021 dated 25.06.2021 to 31.03.2022 vide Circular No.16 of 2021 dated 29.08.2021 and further till 25.11.22 vide Circular No. 22 of 2022 dated 01.11.2022
Hence in the above background whether provisional registration/approval obtained before 25-11-2022 by an existing 12A registered/80G approved organisation can also be regularized to five-year registration/approval under this Circular?
If an existing registered organisation under section 12A has mistakenly obtained provisional registration as a result of selecting the wrong code in their registration application in Form 10A.
Whether such a case falls within the purview of the circular.
If a new organisation while applying for provisional registration, selects the code for a five-year registration and obtained five year registration though not eligible. A question arises whether such a case falls under the guidelines outlined in the Circular. And how to regularise such cases?
Relief for conversion of provisional registration to regular registration (Form 10AB)
If application in form 10AB has not been made so far and time limit has expired
- Submit application in Form 10AB by 30/09/2023
If the application in form 10AB has already been made but beyond the specified timeline and the order is yet to be passed
If the application made in Form 10AB has been rejected solely on the ground that application was furnished after due date
- Application shall be considered & disposed off after hearing
- Pending application in Form 10AB shall be treated as valid application
- Application shall be considered & disposed off after hearing
- Fresh application in Form 10AB within the extended time of 30/09/2023
- Application shall be considered & disposed off after hearing
- No Exit Tax for delay in filing of application in Form 10AB
- No Exit Tax for delay in filing of application in Form 10AB
- No Exit Tax for delay in filing of application in Form 10AB
NOTE : No such extension has been granted for converting provisional approval under section 80G to regular approval under section 80G
CLARIFICATION ON DATE OF EFFECTIVENESS OF PROVISIONAL REGISTRATION/APPROVAL
Circular 6 has brought the following anomaly in the Act providing for date of effectiveness of provisional registration/approval :
Provisional Approval u/s. 10(23C)
Provisional Registration u/s. 12AB
Provisional Approval u/s. 80G
Application for provisional registration/approval is required to be made at least one month prior to the commencement of previous year relevant to the AY from which registration/approval is sought/made
Such registration/approval shall be from the Assessment Year immediately following the financial year in which the application is made
Hence to bring consistency the Circular has clarified that the provisional registration/approval shall be effective from the assessment year relevant to the previous year in which the application is made subject to the provision of converting the same to normal registration/approval.
Whether this circular which is clarificatory in nature shall have its force for previous approvals granted?
If yes, whether 80G approvals already granted can be subject to modification if date of effectiveness is not in term of this circular ?
▸ Circular has extended the date for submitting applications in Form 10AB to convert provisional registration/approval under sections 12AB or 10(23C) where the original due date has already expired
▸
No such extension has been granted for converting provisional approval under section 80G to regular approval under section 80G.
Provisional approval under section 80G was granted for a period of 3 years, with the condition that such approval should be regularised within six months of the commencement of charitable activities or six months prior to the expiry of provisional approval, whichever is earlier.
However, no implication has been provided for in the law if delay is made in making application in such cases as has been provided in the case of registration u/s. 12AB & approval u/s. 10(23C).
Hence the issue to be examined whether in such cases, donations already received upto to the due date of submitting of application for re-approval or received subsequently, shall be subject to the benefit of 80G or not.
Under Income Tax only one Board Circular is available for reference in such case :
Board Circular No.28 (XXIII-25)D/1961 – F. No. 69/64/61-IT, Dated 21st September, 1961, which provides –
Subject :- Certificate granted under section 15-B – Cancellation of – Treatment of donations made prior to cancellation.
“
………. Any order cancelling a certificate under section 15-B can have effect only from the date of the order. Therefore, donations which were paid before this date should not be denied the rebate admissible under section 15-B.
The implication of donations received in each of the following cases :-
a) Timely Application for converting provisional registration has been rejected – let say – on 28th February, 2023
b) Delayed Application in 10AB for conversion of provisional approval has been rejected by CIT(E) in April, 2023 due to delay in submission
c) Application for converting provisional approval to normal approval is not yet made, though last date has expired on 30/09/2022
Fact : If an organization obtained provisional approval under section 80G but application for conversion to regular approval could not be made in time .
Issue : How to regularise such cases ?
