Tag NGO EXEMPTION

Charitable and religious trusts must register under Section 12AB of the Income Tax Act in order to be eligible for income tax exemptions. Registrations were first granted with a limited validity, typically five years, when this option was first implemented.

In order to continue receiving tax benefits, many trusts must renew their registration before their current period comes to a completion. One significant change brought about by the Finance Act 2025 is that qualifying entities can now receive 10-year validity rather than 5-year.

Also read here

Section 12AB Registration – Meaning, Importance, and Latest Changes (2025 Update)

Eligibility and Documents Required for Section 12AB Renewal in 2025

Why Renewal is Mandatory

Prior to the expiration date, each trust or institution that has acquired Section 12AB registration must submit an application for renewal. This is a must. The trust will lose its tax exemption benefits under Sections 11 and 12 if the renewal is not completed within the allotted period.

According to the law, the application for renewal must be submitted at least six months before the expiration date. The renewal must be submitted by September 30, 2025, for registrations that expire on March 31, 2026.

Eligibility for 10-Year Validity

In substitution of the previous 5-year cycle, the Finance Act 2025 added a provision that permits some trusts to be renewed for ten years. To be eligible,

• The total revenue of the trust, as determined without the use of Sections 11 and 12, cannot be more than ₹5 crore in each of the two years before the application year.
• Not gross receipts, but total income is subject to this cap.

For instance, you can renew your trust for a 10-year period if its total revenue (before exemptions) was ₹4.5 crore in FY 2023–2024 and FY 2024–2025.

Step-by-Step Process for Renewal

Form 10AB must be filed on the Income Tax e-filing portal as part of the entirely online renewal process. The steps are as follows:

Step 1: Log in to the Portal

Go to the Income Tax e-filing portal and log in using the trust’s credentials.

Step 2: Select Form 10AB

Navigate to ‘e-File’ > ‘Income Tax Forms’ > ‘File Income Tax Forms’ and choose Form 10AB under the relevant section.

Step 3: Choose Correct Category

In the form, select the correct sub-clause under Section 12A(1)(ac) for renewal (usually sub-clause (ii) for standard renewal).

Step 4: Attach Documents

Upload the following documents:

• Audited financial statements for the last two financial years
• Computation of income showing compliance with the ₹5 crore limit
• Trust deed and registration certificate
• Activity report and compliance certificates

Step 5: Submit and Verify

Submit the form online and verify it using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).

Timelines and Processing

The application will be processed by the Commissioner of Income Tax (Exemptions) or the Principal Commissioner after it is submitted. The order must be issued within six months of the end of the quarter in which the application is filed, according to the statute. The registration will be renewed upon verification of authentic activity and completion of all necessary documentation.

Consequences of Non-Renewal

Sections 11 and 12 exemptions will be lost if the registration is not renewed by the deadline. A significant tax burden could arise from the trust’s revenue becoming taxable. Penalties for non-compliance are another possibility.

Tips for Preventing Penalties

• Apply as soon as possible: don’t hold off until the last minute. Apply seven to eight months prior to expiration.
• Verify that the documents are complete: Missing paperwork may cause permission to be delayed.
• Monitor the status of your application: Check the portal frequently for updates.

Conclusion

In order to continue receiving tax benefits, charity and religious organisations are required by law to renew their Section 12AB registration. If qualifying trusts meet the ₹5 crore income criterion, they can achieve long-term compliance with the new 10-year validity requirement. The secret to avoiding fines and preserving exemption benefits is the timely filing of Form 10AB with correct documentation.

Charitable trusts and non-profit institutions in India enjoy income tax exemptions under the Income Tax Act, provided they are registered under Section 12AB. These registrations were initially granted for a limited period, mostly up to March 31, 2026, which means renewal is now mandatory to continue availing benefits. The Finance Act, 2025 has introduced a 10-year validity for eligible trusts, replacing the earlier 5-year cycle.

Also read here

Section 12AB Registration – Meaning, Importance, and Latest Changes (2025 Update)

Who Needs to Renew Section 12AB Registration?

Every trust or institution registered under Section 12AB must apply for renewal at least six months before the expiry date of the current registration. For registrations expiring on March 31, 2026, the last date to apply is September 30, 2025.

Renewal is not optional; it is a legal requirement under Section 12A(1)(ac)(ii). Failure to renew may lead to cancellation of the registration and loss of tax benefits under Sections 11 and 12.

Eligibility for Renewal with 10-Year Validity

The Finance Act, 2025 has brought a major change in validity. If a trust meets certain conditions, the renewed registration will be valid for 10 years instead of 5. The key eligibility requirement is:

Income Threshold Test:

The trust’s total income, calculated without claiming exemptions under Sections 11 and 12, should not exceed ₹5 crore in each of the two previous years before the year of application.

This means, when applying for renewal in 2025, the income for FY 2023-24 and FY 2024-25 will be checked. If the income exceeds ₹5 crore in any of these two years, the trust will get a 5-year validity instead of 10.

Points to Remember:

• Total income is not the same as gross receipts.
• It must be computed as per the Income Tax Act, excluding the benefits under Sections 11 and 12.

Who Cannot Get 10-Year Validity?

• Trusts with income above ₹5 crore in either of the two preceding years.
• Provisional registrations under sub-clause (vi) of Section 12A(1)(ac) (they still get 3-year validity).
• Such trusts can apply again after the provisional period ends, but they will not automatically qualify for the 10-year period.

Documents Required for Section 12AB Renewal

To apply for renewal, trusts must submit an application in Form 10AB through the Income Tax portal. Along with the form, the following documents are generally required:

1. Trust Deed or Registration Certificate – A copy of the original trust deed or instrument of establishment.
2. Audited Financial Statements – For the two years immediately preceding the year of application (e.g., FY 2023-24 and FY 2024-25).
3. Income Computation – Showing total income without exemptions under Sections 11 and 12, proving the ₹5 crore threshold compliance.
4. PAN of the Trust/Institution – Mandatory for filing.
5. Details of Trustees/Office Bearers – Names, PAN, and addresses of all key persons.
6. Activity Report – A brief report of activities carried out during the preceding years.
7. Registration under Other Laws – Copies of registrations under laws like the Societies Registration Act or Companies Act (if applicable).
8. Compliance Certificates – Declarations confirming adherence to conditions under Section 12AB.

Practical Tips for Smooth Renewal

• Apply early: Do not wait for the last date. File at least six months before expiry.
• Keep accounts updated: Ensure audits for FY 2023-24 and FY 2024-25 are completed well before filing.
• Attach all required proofs: Missing documents can delay or reject the application.
• Check income calculations carefully: The ₹5 crore limit applies to total income, not receipts.

Conclusion

Renewal of Section 12AB registration is mandatory for all trusts and institutions to retain their tax exemptions. For those meeting the income threshold of ₹5 crore or less in each of the two preceding years, the Finance Act, 2025 offers a 10-year validity, providing long-term stability. Timely application through Form 10AB, supported by complete and accurate documentation, is crucial to avoid penalties and ensure uninterrupted benefits.