OVERVIEW OF NEW SCHEME OF REGISTRATION. 1. Under the existing law, NGOs are required to get registered under section 12A/12AA or to obtain approval under section 10(23) to claim various exemptions and under Section, 80G to provide deductions to donors. 2. The Finance Act 2020 has introduced substantial changes to the provisions of registration of NGOs. A new section 12AB replaces the existing section 12AA. Similar amendments have been made to section 10(23C) and Section 80G. These changes are effective from 1st June 2020. 3. Registration and approvals of NGOs shall be completely electronic under which a unique registration number (URN) shall be issued to all new and existing charity institutions. 4. NGOs registered prior to 01-06-2020 are required to make an application again under a new scheme of registration. 5. The concept of the perpetuity of registration is withdrawn under the new scheme. The registration under a 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. 6. Registration is required to be renewed every 5 years. Concept of provisional registration introduced for new charity institutions that are yet to start their charitable activities.

1. RECENT DEVELOPMENTS IN
TAXATION OF CHARITABLE &
RELIGIOUS TRUSTS
(INCLUDING AMENDMENTS BY FINANCE ACT
2020)
(28 April 2020 | Adv (Dr.) Manoj Fogla)

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3. TIPS FOR ATTENDEES.
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4. AGENDA FOR WEBINAR.
Overview of New Scheme of registration effective from 1st June 2020
Implications for organisations having registration under both the regimes of section 10(23C) and section 12AA
Re-registration requirement for trust registered under erstwhile section 12A or section 12AA and consequences
of non-filing of application for re-registration
Concept of provisional registration and legal issues pertaining to provisional registration
Treatment of Applications Pending as on 1st June 2020.
Requirement of renewal of registration after the expiry of period of registration
Legal implications and difference between non-renewal or rejection of renewal application and cancellation of
registration by CIT
Tax implications of Corpus Donations made and received by Section 10(23C) approved institutes
Obligation to file a statement of donation by section 80G approved institutes to cross-check claim of donation
by Income Tax Department
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5. 01. NEW SCHEME OF REGISTRATION

6. OVERVIEW OF NEW SCHEME OF REGISTRATION.
Under the existing law, NGOs are required to get registered under section 12A/12AA or to obtain approval under
section 10(23) to claim various exemptions and under Section 80G to provide deductions to donors.
The Finance Act 2020 has introduced substantial changes to the provisions of registration of NGOs. A new
section 12AB replaces the existing section 12AA. Similar amendments have been made to section 10(23C) and
Section 80G. These changes are effective from 1st June 2020.
Registration and approvals of NGOs shall be completely electronic under which a unique registration number
(URN) shall be issued to all new and existing charity institutions.
NGOs registered prior to 01-06-2020 are required to make an application again under new scheme of
registration.
Concept of perpetuity of registration is withdrawn under the new scheme. The registration under new scheme
shall be valid for a specified period, that is, up to 3 years for provisional cases and maximum period of 5 years for
final registration.
Registration is required to be renewed after every 5 years.
Concept of provisional registration introduced for new charity institutions which are yet to start their charitable
activities.
06

7. 2. INTERPLAY OF
SECTIONS 10(23C) AND 12AA

8. CAN AN NGO CLAIM EXEMPTION
UNDER 10(23C) AND 11 & 12 TOGETHER?
Proviso has been inserted to section 11(7) by the Finance Act, 2020 with effect from 01-06-2020 to provide
that the registration referred to in section 12AA/12AB shall become inoperative from later of the following
dates:
a) the date on which the trust or institution is approved under section 10(23C), or is notified
under section 10(46), as the case may be; or
b) the date on which the proviso comes into force, that is, 1st June, 2020.
In simple words, the registration under section 12AA shall become inoperative if an approval is obtained
under section 10(23C) or the Institution is notified under section 10(46). Hence, an entity has an option to
claim exemption either under section 10(23C) or section 11.
Amendment by the Finance Act 2020
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9. CAN REGISTRATION BE MADE OPERATIVE AGAIN?
Second proviso has been inserted to section 11(7) with effect from 1st June, 2020. This proviso provides
that trust or institution, whose registration has become inoperative under the first proviso, may apply to
get its registration again operative under section 12AB. However, on doing so, the approval under section
10(23C) or notification under section 10(46), as the case may be, to such trust or institution shall cease to
have any effect from the date on which the said registration becomes operative and thereafter, it would
not be entitled to exemption under the respective clause.
In simple words, if the registration again becomes operative, the approval or notification shall cease to
have effect and the exemption under these clauses will not be available thereafter. Thus, once the
registration becomes operative the trust or institution will not be entitled to exemption under section
10(23C)/10(46).
Amendment by Finance Act 2020:
09

10. FAQ’s.
The new provision will not apply to the Institutions covered under section 10(23C)(iiiab) to (iiiae) where the
exemption is granted without any approval to such Institution, etc. Thus, such Institution can continue to
avail of the exemption under section 10(23C) as well as section 11.
What will happen to the cases where the approval under section 10(23C) isn’t required?
This situation is not covered by the second proviso to section 11(7). Further, there is no amendment to
section 10(23C) corresponding to the first proviso of section 11(7). Hence, it could be argued that there is
no express prohibition against grant of registration in such circumstances and once the registration is
granted, the trust will continue to have the option to claim exemption under section 10(23C) or section 11.
However, it seems an unintentional mistake and can clarified by the department in future.
What will happen if a trust approved under section 10(23C) before 01-06-2020 but it is not registered
under section 12AA on the same date and subsequently it gets registration under section 12AB?
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11. FAQ’s.
This is explained in the Explanatory Memorandum to the Finance Bill 2020, which provides that “the
switching may be allowed only once so that such switching is not done routinely and also it remains
efficient to be administered.” Thus, a trust already registered under section 12AA and also having
approval under section 10(23C) can switch only once as the first proviso will automatically apply on 1st
June, 2020.
How many times a charitable institution could switch from section 11 to section 10(23C)
and vice versa?
The registration under section 12AA or section 12AB becomes inoperative but is not cancelled. Hence, a
trust whose registration is inoperative will not be liable to exit tax under section 115TD which becomes
applicable upon cancellation of registration.
Will the provisions of Section 115TD apply in case registration becomes inoperative?
11

12. 3. RE-REGISTRATION OF TRUST
(REGISTERED UNDER ERSTWHILE SECTION 12A OR 12AA)

13. RE-REGISTRATION OF TRUST.
Order granting registration shall be passed within 3 months from the end of month in which application for
such registration is filed.
IS YOUR NGO
EXISTING
BEFORE
01-06-2020?
No Action
Required.
IS YOUR NGO REGISTERED
U/S 12A/12AA OR
APPROVED U/S
10(23C) OR 80G?
FILE AN
APPLICATION
AGAIN FOR
REGISTRATION
BY 31.08.2020.
YES
File an application under
new provisions,
if registration is desired.
Registration shall be
granted for 5 years
without
any enquiries by PCIT/CIT.
YES
NO
NO
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14. FAQ’s.
The PCIT/CIT does not have the power to satisfy himself about the objects or the genuineness of activities.
Hence, he has to mandatorily pass an order in writing granting the registration in such cases.
Can CIT make enquiries while entertaining applications of re-registration?
If the trust fails to make an application by 31.08.2020, it shall loose exemption benefits for A.Y. 2021-22.
Further, mere non-submission of an application for registration does not mean that the previous
registration is cancelled. Hence, the provisions of section 115TD may not be applicable in such case.
What shall be consequences of not making application for registration by 31.08.2020?
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15. 4. PROVISIONAL REGISTRATION

16. WHAT IS PROVISIONAL REGISTRATION?
There has always been dispute between the income tax department and NGOs seeking registration, before
the commencement of activities. At various occasions, the courts have held that the newly registered NGO
is entitled to registration on basis of its objects even if no activity has been undertaken.
Rationale behind the amendment:
Concept of provisional registration is meant for new charity institutions which are yet to start their
charitable activities.
Provisional registration shall be granted without any enquiries by the department.
Registration shall be granted for a period of 3 years.
Amendment by the Finance Act, 2020:
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17. PROCEDURE FOR PROVISIONAL REGISTRATION.
Application for registration to be made at least 1 month before the commencement of previous year
Provisional registration shall be granted for 3 years without any enquiries by PCIT/CIT.
Application to be made again within 6 months before expiry of 3 years or within 6 months of
commencement of activities, whichever is earlier.
Order granting registration in such cases shall be passed within 1 month from the end of the month
in which such application is filed.
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18. FAQ’s.
There is no explicit provision for cancellation of registration upon a trust not making an application for
registration. Hence, it cannot be said that the registration of the trust is cancelled for the purposes of
section 115TD. However, the trust shall not be able to claim the benefit of exemption provisions.
Whether provisional registration shall be cancelled if trust fails to convert it to normal
registration after 3 years?
The application for final registration has to be made, inter alia, within 6 months of commencement of
activities. The term “activity” is not defined in the Income Tax Act. The term ‘activity’ is very wide and
would mean a specific action, work or operation carried out by the institution to achieve its objectives.
However, a clarification by CBDT is desired in this regard.
Application has to be made for final registration within 6 months of commencement of activities,
what is meaning of activity?
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19. 5. APPLICATIONS PENDING ON
1st JUNE 2020

20. STATUS OF APPLICATIONS PENDING ON 01-06-2020.
Applications for registration pending on 1st June 2020 shall be considered as if application was made for
provisional registration and hence, applicants making such applications are not required to apply again and they
shall be granted provisional registration by the department.
The registration in such cases shall be granted for 3 years without any enquiries by PCIT/CIT.
Key Issues:
How the cases will be dealt where the CIT has already completed hearings?
What shall happen to the cases where the application was made after commencement of activities?
What shall be effective date of exemption?
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21. 6. RENEWAL OF REGISTRATION

22. RENEWAL OF REGISTRATION.
NGO registered u/s 12AB or approved u/s 10(23C) or Section 80G shall file a fresh application within
6 months before the period of 5 years expires.
PCIT/CIT shall make enquiries to satisfy himself about the genuineness of activities and compliance
of other laws
If PCIT/CIT is satisfied, Approval shall be granted for 5 years.
If PCIT/CIT isn’t satisfied, he shall pass an order rejecting such application and also cancelling its
registration.
Order granting registration or rejection shall be passed within 6 months from the end of the month
in which such application is made.
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23. CASES COVERED & TIMELINES.
Where a trust has been registered under the new scheme and the period of the said registration is
due to expire, the application has to be made at least 6 months prior to expiry of period of
registration
Where a trust has been provisionally registered under new scheme, the application for final
registration has to be made at least 6 months prior to expiry of the period of the provisional
registration or within 6 months of commencement of its activities, whichever is earlier.
Where registration of a trust has become inoperative due to the first proviso to section 11(7), the
application has to be filed at least 6 months prior to the commencement of the assessment year
from which the registration is sought to be made operative.
Where a trust has adopted or undertaken modifications of the objects in a manner not conforming
to the conditions of registration, the application has to be made within a period of 30 days from the
date of the said adoption or modification.
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24. 7. IMPLICATION OF REJECTION
OF RENEWAL OR
NON-RENEWAL OF REGISTRATION

25. REJECTION OF RENEWAL APPLICATION.
If PCIT/CIT is not satisfied, he shall afford the trust a reasonable opportunity of being heard and
subsequently, pass an order in writing rejecting such application and also cancelling its registration.
This condition of cancellation was not under the pre-amended section 12AA, the new provisions
provide for cancellation of existing registration. This could result in a serious compliance issues for
the applicant.
If the registration is cancelled, the trust would be liable to exit tax under section 115TD.
The rejection order has to be passed by CIT before expiry of 6 months from the end of the month in
which the application was received.
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26. NON-RENEWAL OF REGISTRATION.
If the trust does not make application at least 6 months prior to the expiry of the period of
registration, the trust should not get exemption for the financial year in which such application
ought to have been made.
It would not be eligible to obtain an approval under section 80G(5) or its existing approval would be
liable for cancellation.
Non-submission of an application for registration does not mean that the previous registration is
cancelled. Hence, trust cannot be penalised by levy of exit tax under section 115TD.
26

27. 8. CORPUS DONATIONS OF SECTION
10(23C) APPROVED INSTITUTES

28. CORPUS DONATION RECEIVED BY INSTITUTION.
Hitherto, it was not clear whether a corpus donation received by the institution was to be included in
income or not.
Rationale behind the amendment
Explanation has been added to the third proviso with effect from 1st April 2020 to clarify that any corpus
donations made to such institution are exempt in the hands of the institution.
Such Explanation is clarificatory in nature and therefore, should apply retrospectively.
Amendment by the Finance Act, 2020
28

29. CORPUS DONATION MADE BY INSTITUTES.
Twelfth proviso is amended to disallow corpus donations not only to trust or institution registered under
section 12AA but also to any other fund or trust or institution or any university or other educational
institution or any hospital or other medical institution referred to in sub-clause (iv) / (v) / (vi) / (via).
Amendment in twelfth proviso
Explanation 2 has been amended to provide that any amount credited or paid out of income referred to in
section 11(1)(a) / (b) read with Explanation 1, to any fund or trust or institution or any university or other
educational institution or any hospital or other medical institution referred section 10(23C)(iv) / (v) / (vi) /
(via), being contribution with a specific direction that they shall form part of the corpus should not be
regarded as application of income for the donor-institution.
Amendment in section 11(1)
29

30. 9. FILING OF STATEMENT
OF DONATION

31. OBLIGATION TO FILE STATEMENT OF DONATION.
Trust or institution approved under section 80G are now required to file statement of donation
received and also to issue the certificate to the donor.
Deduction on account of donation under section 80G shall be allowed to the donor only on the basis
of the statement filed by the donee trust.
If there is any mistake in the aforesaid statement or any addition, deletion or updation is warranted
in it, then the institution may also deliver to the said prescribed authority a correction statement for
rectification of the information furnished in the statement in prescribed form and verified in
prescribed manner.
31

32. CONSEQUENCES OF NON-COMPLIANCE.
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.
Late Fee:
If the trust or institution fails to file such statement, a penalty under Section 271K shall be leviable which
shall not be less than Rs.10,000/- and which may extend up to Rs. 1 lakh.
Penalty:
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