Charitable Institutions to Reapply for 12AA and 80G

In India we have a tradition about breaking bad news slowly. The moment we read the Finance Bill 2020 and its ominous proposals, our heart sank, despite our having warned one and all about new horrors that the Finance Bill 2020 would unleash on the voluntary/social sector. It was a Saturday when the Finance Bill 2020 was presented and we did not wish to ruin anyone’s weekend. But now it’s Monday. Brace yourselves for some bad news!

Remember the time, we had to renew our 80G certificate every three to five years until an amendment under Finance Act 2009 made all 80G certificates expiring after 1st October 2009 valid in perpetuity unless specifically cancelled or revoked under gazette notification? Under section 80G, a tax paying donor can claim tax deduction on income liable to tax.

Also, many NGOs have 12A registrations going back several decades. Once registered, one did not have to renew it. Registration under 12A or 12AA meant, income of the trust or institution was exempt from income tax subject to various compliance under sections 2(15), 11, 12 and 13 etc., of the Income tax Act 1961.

Remember when registration under FCRA 1976 and later even FCRA 2010 renewal was not required. However, Foreign Contribution Regulation Rules 2015 brought in the system of five years validity and renewal.

Well Finance Bill 2020 seems to have drawn inspiration from Ministry of Home Affairs.

The Bad News

Charitable trusts and institution which are already registered u/s 12A or 12Aa of Income tax Act 1961 will now be required to re-apply online for registration/approval by 31st August 2020. An order granting registration/approval shall be passed within 3 months of the application. Such registration/approval shall be valid for 5 years.

Similarly, charitable trusts and institution which already have 80G certificate will now be required to re-apply online for registration/approval by 31st August 2020. An order granting registration/approval shall be passed within 3 months of the application. Such registration/approval shall be valid for 5 years.

Finance Bill 2020 can be read or downloaded at: https://www.indiabudget.gov.in/doc/Finance_Bill.pdf

Do read the amendments concerning 12AA and 80G carefully.

We reiterate our strongly held belief:

  1. Governing a non-profit charitable trust or institution is far more complex and complicated than running a for-profit business;
  2. There may be ease of doing business. But, there is no ease of doing charity.
  3. The ancient curse: “May you live in interesting times” is upon us. Stay strong. This too shall pass!

Noshir H. Dadrawala

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