Section 12A Income Tax Act - Registration & Eligibility Criteria

Introduction

If you are running a Non-Governmental Organization (NGO) in India, whether it is a charitable trust, a society, or a Section 8 company, your primary goal is social welfare, not profit. However, the Income Tax Department views every organization as a potential taxpayer unless proven otherwise. This is where Section 12A (now governed by the new Section 12AB regime) comes into play.

Without this "Gold Standard" registration, your NGO is treated just like a normal business. Any surplus you generate, even from donations, is taxed at the maximum marginal rate. Worse, without it, you cannot offer tax deductions to your donors under Section 80G, which can severely cripple your fundraising efforts.

In 2025, the rules for this registration have evolved significantly. From the introduction of a longer 10-year validity period for smaller trusts to stricter compliance for renewal, the landscape has changed. In this guide, we will walk you through the eligibility, the shift from Section 12A to 12AB, and the step-by-step registration process you need to follow today.

Table of Contents

1. What is Section 12A Registration?
2. The Shift to Section 12AB (The New Regime)
3. 2025 Update: The New 10-Year Validity Rule
4. Eligibility Criteria for Registration
5. Documents Required for Form 10A and 10AB
6. Step-by-Step Registration Process
7. Time Limit for Application (Fresh vs Renewal)
8. Can Section 12A Registration Be Cancelled?
9. FAQs

What is Section 12A Registration?

Section 12A is a provision in the Income Tax Act, 1961, that allows non-profit entities to claim full exemption from income tax.

When an NGO is registered under this section, the "surplus" income (Income minus Expenditure) is not taxed, provided that the money is applied for charitable or religious purposes. Technically, Sections 11 and 12 of the Act provide the exemption, but Section 12A (and now 12AB) is the key that unlocks these sections.

Key Benefits:

• Tax Exemption: You pay zero tax on surplus income if 85% of your income is applied to charitable causes.
• FCRA Eligibility: It is a prerequisite for applying for FCRA registration to receive foreign funds.
• Grant Eligibility: Most government and CSR grants require a valid 12A certificate.

The Shift to Section 12AB (The New Regime)

For decades, Section 12A registration was a one-time, lifetime registration. Once you got it, you kept it forever unless specifically cancelled.

However, the Finance Act, 2020, completely overhauled this system.

• Old Law: Perpetual Registration (Section 12A/12AA).
• New Law: Renewable Registration (Section 12AB).

Under the current Section 12AB regime, no registration is permanent. All NGOs must renew their registration every 5 years (or 10 years for small trusts, as per the 2025 update). If you fail to renew on time, your registration lapses, and you could face a massive tax liability on your assets under Section 115TD (Accreted Tax).

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2025 Update: The New 10-Year Validity Rule

The Finance Act, 2025, brought a sigh of relief for smaller organizations.

Previously, all regular registrations were valid for 5 years. Now, to reduce the compliance burden, the government has introduced a 10-Year Validity period for "smaller trusts."

Who is eligible for the 10-year certificate?

• Trusts or institutions whose Gross Receipts (before exemption) do not exceed ₹5 Crore in each of the two financial years preceding the application.
• Note that this is not automatic. You must file your renewal application (Form 10AB) to claim this extended validity. If your income exceeds ₹5 Crore later, you may revert to the 5-year cycle during the next renewal.

Eligibility Criteria for Registration

Not every organization can apply. To be eligible, you must meet these strict conditions:

1. Charitable Purpose: Your objectives must fall under categories like relief of the poor, education, medical relief, preservation of the environment, or advancement of any other object of general public utility.
2. No Profit Motive: The activities must not be driven by profit. Any surplus generated must be plowed back into the organization’s objectives.
3. Prohibited Benefits: No part of the income or property should benefit the author of the trust, trustees, or their relatives.
4. Proper Constitution: You must be legally registered as a Public Charitable Trust, a Society (under Societies Registration Act), or a Section 8 Company. Private family trusts are not eligible.

Documents Required for Form 10A and 10AB

The entire process is online, and you will need to upload self-certified copies of the following:

• Constitutional Document: Trust Deed, MOA/AOA of Section 8 Company, or Society Bye-laws.
• Registration Certificate: Certificate from the Charity Commissioner, Registrar of Societies, or ROC.
• PAN Card: Copy of the NGO's PAN.
• Trustee Details: ID proofs (Aadhaar/PAN) and address details of all trustees/directors.
• Financials: Audited Balance Sheet and Income & Expenditure Account for the last 3 years (not required for new NGOs).
• Activity Report: A detailed note on the charitable activities conducted in the last 3 years.

Step-by-Step Registration Process

The application process involves two stages depending on whether you are a new NGO or an existing one.

Step 1: Provisional Registration (For New NGOs)

If you are starting a new NGO, you cannot get permanent registration immediately.

1. File Form 10A on the Income Tax E-filing portal.
2. This requires minimal scrutiny.
3. You will receive a Provisional Registration valid for 3 Years.

Step 2: Regular Registration (For Existing/Provisional NGOs)

Once you have Provisional Registration, you must apply for Regular Registration (Section 12AB).

1. When to Apply: You must apply at least 6 months before the expiry of the provisional period OR within 6 months of commencing charitable activities, whichever is earlier.
2. Form to File: File Form 10AB.
3. Scrutiny: The Commissioner (CIT Exemption) will issue a notice, ask for documents, and verify the genuineness of your activities.
4. Order: On satisfaction, they will issue a Regular Registration order (Form 10AD) valid for 5 years (or 10 years for small trusts).

A common mistake new NGOs make is waiting for the full 3 years of provisional registration to expire. The law says you must apply for regular registration within 6 months of commencing activities. If you start activities in Month 1, you must technically apply for regular registration by Month 7!

Time Limit for Application (Fresh vs Renewal)

Deadlines are critical here. Missing them can lead to "Accreted Tax," which is a levy of roughly 35-40% on the market value of your assets.

• Fresh Application (New NGO): File Form 10A at least 1 month before the commencement of the financial year.
• Renewal Application: File Form 10AB at least 6 months before the expiry of the current registration.

Example: If your registration expires on March 31, 2026, you must have filed Form 10AB by September 30, 2025.

Note for 2025: If you missed the September 30, 2025, deadline, you should immediately file a Condonation of Delay request to the CIT (Exemption) explaining the genuine reason for the delay.

Can Section 12A Registration Be Cancelled?

Yes, the Principal Commissioner (PCIT) has the power to cancel your registration under Section 12AB(4) if:

1. The activities of the NGO are not genuine.
2. The activities are not being carried out in accordance with the objects of the trust.
3. The trust violates Section 13(1) (e.g., investing funds in prohibited modes or benefiting trustees).

New Update: The Finance Act 2025 clarified that a "Specified Violation" (which leads to cancellation) will no longer include minor clerical errors or incomplete applications, which is a relief for honest taxpayers.