2 New rules for registration and approval of NGOs w.e.f. 01-04-2021

New rules for registration and approval of NGOs w.e.f. 01-04-2021

DR. MANOJ FOGLA

Senior Partner -SAGA LAW LLP, & Founder, SAGA

SURESH KEJRIWAL

FCA

TARUN KUMAR

ACA, DIIT-ICAI

2

The Finance Act 2020 has brought in major changes for registration and approval of NGOs by introducing new section 12AB replacing section 12AA and bringing in similar amendments in section 10(23C) and Section 80G. The process of registration and approvals of NGOs is made completely electronic under which a unique registration number (URN) shall be issued to all new and existing charity institutions. This database shall help in bringing the exact size of NGO sector in India as it has always remained unregulated as compared to the corporate sector. Further, under the new scheme of registration, the department will revisit the registration every five years before the expiry of the period of the exemption. Hence, now, the registration under the new scheme shall be valid for a specified period, that is, up to 3 years for provisional cases and a maximum period of 5 years for final registration. These provisions pertaining to registration were originally made effective from 01-062020, subsequently, due to the crisis caused by COVID-19, the CBDT announced to defer the implementation of the new procedure for approval and registration. Accordingly, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘the Amendment Act, 2020’) deferred the date of enforcement of the new procedure introduced by the Finance Act, 2020 to 01-04-2021 and, therefore, the old process for approval under section 10(23C) continued till 31-03-2021. The CBDT has notified the Income-tax (6th Amendment) Rules, 2021. These rules shall come into force on the 1st day of April, 2021. In these rules, the CBDT has notified new process and forms for registration and approval of trust or institution or fund mentioned under section 10(23C), 35, 12A, 80G.

In this article, we have discussed the new requirements of registration and approval for NGOs effective from 1st April 2021.

1. Filing of form 10A

The Income-tax (6th Amendment Rules), 2021 have notified Form 10A for making application for registration or provisional registration or intimation or approval or provisional approval.

1.1. Who can apply in Form 10A?

Form 10A shall be used for the following purposes.

u Application for revalidation of registration/approval for existing trust registered/ approved under Section 12A/12AA/10(23C)/80G. u Application for provisional registrations/approval under section 12AB/ 10(23C) / 80G ( For New cases).

1.2. Timeline to apply in Form 10A

Category Trusts already approved/registered and their approval/registration is continuing on 01-04-2021 Trusts making application for provisional registration/approval Timeline to make application On or before 30-06-2021

1 month before the commencement of the previous year relevant to the assessment year from which the said approval is sought.

1.3. To whom an application has to be made?

The application for the registration in Form 10A shall be made to the PCIT OR CIT authorized by the CBDT.

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The CBDT vide Notification No. 30 /2021/F. No. 370142/4/2021-TPL dated 01-04-2021 has authorized Director of Income Tax (Centralized Processing Centre), Bengaluru and Commissioner of Income-Tax (Exemption), Bengaluru, for the following purposes:

(a) For receiving applications for provisional registration or registration or provisional approval or approval or intimation in Form 10A. (b) For passing order granting provisional registration or registration or provisional approval or approval in Form 10AC. (c) For issuing Unique Registration Number (URN) to the applicants (d) For cancelling the approval granted in Form 10AC and Unique Registration Number (URN)

1.4. Procedure on receipt of application in Form 10A

On receipt of an application in Form No. 10A, the PCIT or CIT shall pass an order in writing granting approval in Form No. 10AC and issue a sixteen-digit alphanumeric Unique Registration Number (URN) to the applicants. If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under this rule, the PCIT or CIT, after giving an opportunity of being heard, may cancel the approval granted in Form No. 10AC and URN, and such approval in Form No.10AC or such URN shall be deemed to have never been granted or issued.

2. Filing of Form 10AB

The Income-tax (6th Amendment Rules), 2021 have notified Form 10AB for making application for registration or approval.

2.1. Who can apply in Form 10AB?

Form 10AB shall be used for the following purposes.

u Conversion of provisional registration into regular registration u Renewal of registration/approval after five year u Activating inoperative registration due to approval under section 10(23C)/10(46) u Re-registration for modification of objects for entities registered under

Section 12AB

2.2. Timeline to Apply in Form 10AB

Category

Conversion of provisional registration into regular registration At least 6 months before the expiry of period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier.

Renewal of registration/approval after five year Activating inoperative registration due to approval under section 10(23C)/10(46) Re-registration for modification of objects for entities registered under Section 12AB

Timeline to Apply

At least 6 months prior to expiry of the said registration period. At least 6 months before the commencement of the assessment year from which the said registration is sought to be made operative. Within 30 days from the date of the said adoption or modification.

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2.3. Procedure on receipt of application in Form 10AB

Once an application in Form 10AB is submitted by the Trust or Institution, a notice is issued by the concerned commissioner to furnish the documents/clarifications/ information to satisfy himself about the genuineness of activities of the trust or institution and the compliance of such requirements of any other law for the time being in force by the trust or institution as are material to achieve its objects. The commissioner is under an obligation to follow the procedure prescribed under section 12AB/10(23C)/80G before he grants or refuses registration or approval. In case of an application made in Form No. 10AB, the order of registration or rejection or cancellation of registration shall be in Form No. 10AD and in case if the registration is granted, sixteen-digit alphanumeric number URN shall be issued by the PCIT or CIT.

3. Documents to be submitted

The application in Form Nos. 10A or 10AB shall be accompanied by the following documents:

(a) where the applicant is created or established, under an instrument, selfcertified copy of such instrument creating or establishing the applicant; (b) where the applicant is created or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant; (c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be; (d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act; (e) self-certified copy of existing order granting approval under clause (23C) of section 10; (f) self-certified copy of order of rejection of application for grant of approval under clause (23C) of section 10, if any; (g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, selfcertified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up; (h) where a business undertaking is held by the applicant as per the provisions of sub-section (4) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and selfcertified copy of the report of audit as per the provisions of section 44AB for such period;

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(i) where the income of the applicant includes profits and gains of business as per the provisions of sub-section (4A) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period; (j) note on the activities of the applicant

4. Mode of filing form

The application in Form Nos. 10A or 10AB shall be furnished electronically under digital signature, if the return of income is required to be furnished under digital signature. In other cases, it shall be submitted through electronic verification code (EVC).

5. Verification of Form

The application shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

6. Requirement of darpan ID

NGOs play a major role in the development of the nation by supplementing the efforts of the Government. Registration with NitiAayog is mandatory to apply for grants under various schemes of Ministries/Departments/Governments Bodies. NitiAayog developed a portal NGO-DARPAN to provide a space for the interface between NGOs/Voluntary Organizations (VOs). NGO-DARPAN portal has been started as an initiative of the Prime Minister’s Office, to create and promote a healthy partnership between VOs/NGOs and the Government of India. This Portal is managed by NITI Aayog currently. It is an e-governance application offered by NITI Aayog to electronically maintain data and transparency regarding NGOs/VOs in the country. NGO has to sign-up on the NGODARPAN portal to obtain a Unique Identity Number (UIN) by furnishing the required details like registration number of the organization, PAN of the organization, PAN and Aadhaar details of the office bearers/trustees etc.

The new rules provide that the applicant has to provide:

(a) Details of Registration number with Darpan portal of NitiAayog is to be provided if already there and (b) mandatorily to be given if the applicant receives or intends to receive any grant or assistance from either the Central Government or State Government.

7. Requirement to file statement of donation and issuance of certificate to donor

7.1. Obligations to file Statement of Donation

With effect from the financial year 2021-22, the institutions notified under section 35 or approved under Section 80G are required to file a statement of donation received and also to issue the certificate to the donor. Deduction on account of the donation shall be allowed to the donor only on the basis of the statement filed by the donee trust or institution. Hence, if a statement is not filed, the donor will not get a deduction for the donation.

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In case of delay in filing such statement, a late fee of Rs. 200 per day shall be applicable under newly inserted Section 234G of the Income-tax Act. Further, a penalty under Section 271K, which shall not be less than Rs. 10,000 and which may extend up to Rs. 1 lakh, shall be leviable if the trust or institution fails to file such statement or fails to issue a certificate of donation.

The Income Tax (6th Amendment) Rules, 2021 has inserted new Rule 18AB for Furnishing of Statement of particulars and certificate under clause (viii) and clause (ix) of section 80G(5) or under section 35(1A).

7.2. Form for filing

Statement of particulars required to be furnished by reporting person shall be furnished in respect of each financial year, beginning with the financial year 2021-2022, in Form No. 10BD

7.3. Aggregation of Amount

The reporting person shall while aggregating the amounts for determining the sums received for reporting in respect of any person take into account all the donations of the same nature paid by that person during the financial year. The donations shall be proportionately attributed the value of the donation or the aggregated value of all the donations to all the persons, in a case where the donation is recorded in the name of more than one person and where no proportion is specified by the donors, attribute equally to all the donors.

7.4. Certificate to Donor

The reporting person shall furnish the certificate to the donor in Form No. 10BE specifying the amount of donation received during financial year from such donor.

7.5. Date of filing and Issuing Certificate

The certificate of donation in Form 10BE is required to be furnished to the donor on or before the 31st May, immediately following the financial year in which the donation is received.

Statement of donation in Form No. 10BD shall be furnished on or before the 31st May, immediately following the financial year in which the donation is received.

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