Budget Proposals: NPO Taxation
In today’s post, proposals relating to registration requirement for New NGOs are covered.
NEW NPOS
S.12AA/S.80G/S.10(23)
Earlier any NPO wanting to apply for registration under S.12AA or S.10(23C) could do so anytime. Generally once granted approval, it was applicable form the Assessment year in which the NGO applied. However now the new NGO will need to apply before the commencement of the financial year (at least one month prior the commencement of the FY) from which the NGO wishes to avail Income Tax exemption. Thus if an NPO is formed say on 2nd March 2020, it cannot apply for registration, which would cover Financial Year 2020-21. Its income could be exempt from tax only from FY 2021-22, provided application for exemption certificate is made at least before 1st March 2021.
Once applied, a provisional certificate will be issued within one month of filing the registration application. The provisional certificate would be valid for 3 years. This is a positive development, as it will reduce corruption and hassles that new NGOs face while applying for S.12AA registration at present, as they are required to prove that their activities are genuine.
For converting provisional certificate into a Final Certificate, one would need to apply 6 months after starting the activities or six months prior to expiry of the provisional certificate whichever is earlier. Tax authorities will have six months to decide before issuing the final certificate.
Similar process is applicable in case of S.80G & S.10(23).
Only one registration to be opted out of S.12AA or S.10(23)
It may be noted that in future only one registration under Section 12AA or S.10(23) will remain operative. Thus in case of a new NPO, if it already has S.12AA registration, as soon as it obtains S.10(23) registration, it will have to opt for cessation of the earlier registration under S.12AA. In case of existing NPO having registration both under S.12AA & S.10(23), they will need to opt for one and then continue only that one in future.
Remaining aspects of changes in the Budget would be covered in next post.
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Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
This is still a proposal in the budget, once the Finance Bill 2020 is passed in the Loksabha and is gazzetted, it would become applicable. I am sure SRRF Dialogue will keep you posted as soon as the details are available.
In the meantime several organisations are trying to get the proposal amended, suggest if you could also send a representation to Finance Minister for removing this proposal.
Respected sir, Greetings from Sree Narayana Guru Mission Charities, We are the Registered Trust in Karaikal , UT of Puducherry, We have the Tax Exemption certificates 12AA and 80 G, As per the New Budget 2020, there is notification regarding reapply for the 12AA as 12 AB, 80G, 10C, so that we need to reapply for the same, Please guide us to apply, where should we apply : Trichy or Chennai, How to apply:Online Application or Offline Application, Please Send me the Application , Please Guide us. Thank you.