tax was first introduced in India in 1860. In those days
income related with charitable purposes were totally exempt
from tax. Over the years the Income Tax Act underwent radical
changes, basically to ensure that such exemptions are not
misused by unscrupulous elements. Currently extensive exemptions
are still available to NGOs but a host of regulatory provisions
have been incorporated in the act, which are to be adhered
to, in order to claim exemptions.
order to claim exemption, an NGO should make an application
to the Commissioner of Income Tax for registration of the
NGO. Such application is to be made in Form 10A. The following
documents are required to be submitted :
i) Form 10A
ii) The original instrument under which the NGO is established, or the
Bye Laws & Memorandum of Association evidencing
the creation of the NGO should be enclosed.
iii) Two copies of the Accounts of 3 previous years should be enclosed.
Where the NGO was not in existence in any of
three prior years, copies of the accounts of lesser No. of years may
LIMIT FOR MAKING AN APPLICATION
Provisions prior to 1st June 2007
Prior to the changes made by Finance Act 2007, the application
for registration by an organization should have been made before
expiry of one year from the date of creation of an organization.
Organisation which made delayed application was allowed exemption
with effect from the 1st day of the previous year in which
application is made. The Commissioner of Income Tax had power
to condone the delay in filing application.
Provisions after to 1st June 2007
The above provisions were amended by the Finance Act 2007.
According to the amendment, the power of the Commissioner of
Income Tax (CIT) to condone the delay has been withdrawn w.e.f.
1st June 2007.
Implications of the above amendment
Any delay in the filing of application for registration by
the organisations cannot be condoned by the CIT. The exemption
shall be given from the 1st day of the previous year in which
the application was made and if the organisation has any income
in the previous years prior to filing the application, shall
be subject to tax. Thus the onus of availing exemption of Income
from the Income Tax Department lies on the organisation itself.
THE AUTHORITY TO WHOM APPLICATION IS TO BE MADE
application is to be submitted Income Tax - Registration
Procedure to the Commissioner of Income Tax in whose area
the NGO is located. However, in respect of the four metropolitan
cities of Calcutta, Chennai, Delhi & Mumbai, the applications
are to be made to the Director of Income Tax (Exemption).
GRANTING & REFUSAL
Commissioner of Income Tax, on receipt of an application
for registration of an NGO, shall call for such documents
or information, as he thinks necessary. While processing
such application, the concerned authority normally concentrates
on the genuineness of the NGO. Once the genuineness of the
activities & creation is established, then it is incumbent
upon the authority to pass an order in writing, registering
OPPORTUNITY OF BEING HEARD
Commissioner of Income Tax has the power to reject an application
for registration. It may be noted that such powers cannot
be used arbitrarily without subtantiating adequate reasons
for such rejection. Under the current laws it is statutorily
required that, an opportunity of being heard should be provided
to the applicant, before rejection of any application.
WE APPEAL AGAINST REJECTION
the provisions of Section 253 of the Income Tax Act an appeal
can be made to the Income Tax Appellate Tribunal against
an order rejecting the application for registration. Under
such circumstances if an NGO sincerely believes that an unjust
order has been awarded against it, then it can file an appeal.
LIMIT FOR PASSING THE ORDER
income tax laws the order for either granting or refusing
registration shall have to be passed within six months from
the end of the month in which the application was made.
IF NO ORDER IS PASSED WITHIN THE TIME LIMIT
it is worthwhile to note that, both FCRA and Income Tax laws
in India are vague and ambiguous in this regard. Ironically
it has been clearly mentioned in the Income Tax Act that
an order has to be passed within 6 months but nothing has
been mentioned about the fate of the application if it is
not cleared within 6 months. Some sort of amendment is required
in this regard. A deeming provision for automatic registration
may not be a bad idea. Under FCRA Laws if an NGO applies
for prior permission to receive Foreign Funds and if the
application is not processed within 90 days, the application
is deemed to have been automatically granted. But as far
as registration is concerned both Income Tax Act & FCRA
REGISTRATION ONCE GRANTED BE CANCELLED
Finance Act, 2004 has inserted a new sub-section to section
12AA. By virtue of this newly inserted sub-section 3, the
Commissioner with effect from 1st day of October, 2004 shall
have the power to cancel the registration, if he or she is
satisfied that the acitivities of such trust/institution
are not genuine or are not being carried out in accordance
with the objects of the Trust or Institution. Before such
cancellation, the Commisioner has to provide a reasonable
opportunity of being heard and an order in writing has to
be passed for such cancellation.
application for registration should be made within one year
from the date of creation of Trust. If application is filed
after the period as said, then the Chief Commissioner or
Commissioner can condone the delay after satisfying himself
that sufficient reasons exist for delay. If condonation of
delay has not been granted by the Commissioner, then the
Trust or Institution would be eligible for exemption from
the first day of the financial year in which the application
power empowering the authority concerned to condone the delay,
in case of Trust or Institution who makes an application
before the expiry of one year from the date of creation of
the Trust or the establishment of the Institution, whichever
is later, still remains as it was before, as such authority
concerned have power under the circumstances to condone the
delay, after satisfying the reasons for delay and for reasons
recorded in writing.
OF NGOs OF NATIONAL IMPORTANCE
of India notifies few NGO's in the official gazette each
year. Such notified NGO's are totally exempted from tax even
if they are not registered under section 11 of the Income
Tax Act. All NGO's are open to apply for this recognition.
Currently, the Central Government has exempted various organisations
including universities, sport institutions, medical institutions,
NGO's etc, under these provisions. An NGO can apply for such
exemptions under section 10(23)(c)(iv).
order to claim exemption, an application in Form No. 56 is
to be submitted to the Director General (Income Tax Exemption),
Calcutta through the Commissioner of Income-Tax having jurisdiction
over the Trust or Institution in four copies alongwith the
following documents :
copies of the Deed of Trust/Rules and Regulations/Memorandum
and Articles of Association ;
b) a List of Members of the Governing Council/Body ;
c) photocopies of the latest certificate under Section 80G issued by
the Commissioner of Income Tax, if applicable
photo-copies of the assessment orders passed for the last
three year (or to the extent applicable)
e) photocopy of communication from the Commissioner of Income Tax with
reference to the application of the Fund/Trust/Institution