Registration under Income Tax
The activity of an NGO is towards the society and is normally for public utility and charitable purpose. It is very difficult if not impossible to arrange funds for such noble work. It is precisely because of this income of NGOs are normally exempted from Income Tax. However, there are certain rules and regulations,and guidelines which an NGO must follow to get such exemption. The most important rule relating to this is registration of the NGO under the Income Tax Act. Section 12A of the Income Tax Act deals with application for registration. Section 12AA of the income tax deals with actual
process of registration.
An NGO needs to register itself with Income Tax Department U/s 12AA for availing exemption of its income from income tax.
REQUIREMENT FOR REGISTRATION U/s 12AA
To get yourself register U/s 12AA you need to apply to the Commissioner of Income Tax of your area. Such application should be made within one year of the creation of the Trust. Such an application should be made in Form no. 10A. In case, such an application is delayed, and the registration will be allowed from the financial year in which such application is made i.e. for earlier years the society will have to pay the Income Tax at the usual rate.
CHECK LIST FOR REGISTRATION:
Before you apply for Registration U/s 12AA, you should ensure that you have the following with you:
- Rules and Regulation of the Society.
- Memorandum of the Society.
- List of members of Governing body, their addresses with their designations.
- Copy of Registration Certificate under the Society Registration Act.
- Short note on the activities of the Society.
- Audited accounts of the Society as applicable.
- Form no. 10A duly filled up in four copies.
FILING OF FORM NO. 10A
The Form No. 10A is a simple form and easy to fill. Along with the form no.10A attach various documents mentioned above. Please submit the form by hand at the counter of Commissioner office and obtain a proper receipt of the same. This form requires that the last three years accounts should be attached. However, after the amendment this form must be submitted to the Income Tax Officer within one year of the formation of the society. In most of the cases, the Society will not hold audited accounts for the last three years. A suitable note should be written for this on the form no. 10A itself.
PROCEDURE FOR REGISTRATION
After receipt of your application, the Commissioner will ask for a report from Income Tax Officer. Income Tax Officer may depute an Inspector to your office or may issue a notice for providing necessary documents and books of records for verification.
Since, now a days, most of the Societies apply for registration immediately after creation of the Society practically they do not have any records and books of accounts. It is advised that along with the application proper books of accounts should be made side by side. This will satisfy one of the important areas of the Income Tax formalities. You should update your minute book also. This should also contain first resolution of members for forming society.
After inspection, the Income Tax Officer will submit a report to the Commissioner. The commissioner will issue approval for registration or his refusal based on such report. Hence take care that this report is promptly send by your Income Tax Officer to the Commissioner.
It is also provided that in case, the Commissioner intends to refuse registration to your organization, he will issue a notice to you and you will be given an opportunity to justify your case.
It is now provided in the Act that the Commissioner of Income Tax will take a decision within six months of the month in which application was made.
The approval letter of the Commissioner is a very important document and in the long run, the society will need it badly on many occasions. This is required to be submitted to various agencies where you have invested money for no deduction of tax at source. There are many other uses also. Hence, it is emphasize that you should try to get an approval letter from the Commissioner Office even through it requires a lot of visits,Physical labour, monetary cost on your part. this approval letter contain your registration serial number.
Once you get approval letter, you should make several copies of the same and give one copy each to your Auditor, Tax Consultant, important members of the governing council. Copies of the same should also be placed on files containing important documents relating to your organization.
In extreme cases the Commissioner has power to withdraw the Registration Granted to you. Hence, you should comply with all the formalities of this Income Tax Act including submission of your Income Tax return in time. You should carry out activities of the society as provided in your Rules and Regulation.
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