Tag 80G Income tax

In terms of Indian law and taxation, a Hindu Undivided Family (HUF) is a distinct entity. An HUF is regarded as a person for tax purposes and is acknowledged as a distinct taxable entity under the Income Tax Act, 2025. It is governed by Hindu law and consists of people who share a common ancestor. Members of the family, referred to as coparceners, have a birthright in the joint family property, which is administered by the Karta. An HUF is subject to taxation at the same slab rates as an individual. The simplified tax structure under Section 202 is the default option for Tax Year 2025. Particular legal issues pertaining to the ownership and taxability of the divided property come up during a partition.

Meaning of Partition

‘Partition’ refers to the division of HUF property among its coparceners. It ends the joint status of the family concerning the property being divided. For a valid partition, there must be an actual and physical division of the property. Each coparcener must receive a specific and definite share. A mere division of income without dividing the underlying asset does not constitute a partition under the law.

The right to demand partition lies with all coparceners. In certain circumstances, a mother or wife also becomes entitled to an equal share along with the sons when a partition occurs among male members after the death of the father.

Types of Partition

A partition under Hindu law may be either total or partial.

• Partial Partition: A partial partition occurs either among some members of the family or concerning specific properties. The remaining coparceners continue as an HUF with the remaining assets. For example, if only one coparcener separates while others remain joint, it is a partial partition.

• Total Partition: In a total partition, the entire property of the HUF is divided among all coparceners. The joint family ceases to exist. Once such a partition is completed, the HUF is dissolved for taxation purposes. Each coparcener becomes an independent taxpayer for their respective share of property and income. The tax authorities must verify the genuineness of the partition and record a formal finding under Section 268 of the Income Tax Act, 2025.

Assessment of HUF Partition under Section 268

Section 268 of the Income Tax Act, 2025, governs the assessment of an HUF after a partition claim is made.

• Total Partition: When a total partition is claimed, the tax department conducts an inquiry to verify the claim. If satisfied, they record a finding that the family has been partitioned. They specify the date of partition and assess the total income of the HUF up to that date. For instance, if an HUF earns rental income up to September 2025 and the property is divided on October 1, 2025, the income up to September will be taxed in the hands of the HUF. Income generated thereafter will be taxed in the hands of each individual coparcener.
• Partial Partition: Partial partitions taking place after December 31, 1978, are generally not recognized for tax purposes if the HUF was previously assessed as a separate unit. This rule is maintained under the 2025 Act. Where a partial partition is ignored, the family continues to be assessed as if no partition occurred. The income or property is deemed to continue to belong to the HUF for tax purposes. However, if the family was never previously assessed as an HUF, this restriction does not apply.

Conclusion

The partition of a Hindu Undivided Family is a significant legal and tax event. While total partitions are recognized and lead to separate assessments for each member, partial partitions are often disregarded for tax purposes to ensure administrative simplicity. With the Income Tax Act, 2025 now in force, taxpayers must ensure that physical divisions of property are clearly documented. Maintaining transparent records is essential to validate a genuine partition and successfully transition from an HUF assessment to individual tax filing.

Section 12AB of the Income Tax Act plays a crucial role for charitable trusts and non-profit organisations in India. It ensures that such entities continue to enjoy income tax exemption on their income, provided they meet the prescribed conditions. With the introduction of the Finance Act, 2025, significant updates have been made to the registration framework, making it important for organisations to understand the meaning, importance, and latest changes under Section 12AB.

What is Section 12AB Registration?

Section 12AB registration is a legal requirement for charitable and religious trusts, NGOs, and similar institutions to claim tax exemption on income applied for charitable purposes under Sections 11 and 12 of the Income Tax Act. Without this registration, organisations will not be eligible for these benefits.

Earlier, registrations were granted under Section 12A or 12AA. However, the government introduced Section 12AB to streamline the process and increase transparency. Initially, the registration granted was valid for five years. But the Finance Act 2025 has introduced a new framework offering an extended validity period under certain conditions.

Why is Section 12AB Registration Important?

The importance of Section 12AB registration cannot be overstated for charitable entities. Here are a few reasons why:

1. Tax Exemption on Income: A valid registration under Section 12AB ensures that income applied for charitable or religious purposes is exempt from income tax, subject to compliance with the Act.
2. Eligibility for Donations under Section 80G: Many donors prefer contributing to institutions that are registered, as their donations qualify for tax deductions under Section 80G.
3. Legal Recognition and Credibility: Registration provides legal recognition to the trust or NGO, enhancing its credibility in the eyes of donors, government bodies, and stakeholders.
4. Compliance with Law: It is mandatory for all trusts and institutions to hold valid registration to continue availing benefits. Failure to renew or maintain registration may lead to denial of exemptions and penalties.

Latest Changes Introduced by the Finance Act, 2025

The Finance Act, 2025, has brought a major change in the validity period of registration. Here are the key updates:

1. 10-Year Validity for Eligible Entities

Earlier, registrations were valid for five years. Now, trusts and institutions meeting specific conditions can obtain registration for 10 years. This is a significant relief for organisations, as it reduces the frequency of renewals.

2. Conditions for 10-Year Validity

To qualify for the extended 10-year validity:

• The total income of the trust or institution, computed without giving effect to Sections 11 and 12, should not exceed ₹5 crore in each of the two financial years immediately preceding the application year.
• This calculation excludes exemptions under Sections 11 and 12, meaning organisations must calculate income before applying these benefits.

3. Application Timeline

Trusts with registration expiring on 31 March 2026 must apply for renewal by 30 September 2025. Applications should be filed through Form 10AB on the income tax portal.

Procedure and Compliance

The renewal process requires:

• Filing of Form 10AB under the appropriate sub-clause.
• Submission of supporting documents, including audited financial statements for the last two years, trust deed, activity reports, and income computation to prove eligibility.
• Processing by the Principal Commissioner or Commissioner of Income Tax (Exemptions).
• If the application meets all conditions, the registration order will be issued in Form 10AD with a 10-year validity.

Conclusion

Section 12AB registration remains an essential compliance requirement for charitable and religious institutions in India. The introduction of the 10-year validity framework under the Finance Act, 2025, is a welcome move, reducing administrative burden for genuine organisations. However, eligibility depends on meeting the ₹5 crore income threshold and ensuring timely application before the deadline. Charitable entities should maintain proper documentation and track compliance timelines to secure long-term benefits under this updated regime.