SECTION 12A
Under Section 12A of the Income Tax Act, 1961, non-profit organizations like charitable trusts, welfare societies, NGOs, religious institutions, etc. are entitled to tax exemptions. This tax relief was introduced, keeping in consideration that non-profit entities work for social welfare and not for generating profit.
What is Section 12A ?
Once the Trust organization or NGO is established, they have to register as per Section 12A of the Income Tax Act for claiming exemption under Section 11 and 12 of the Income Tax Act. Section 12A enables non-profit entities such as Charitable Trusts, Non-Profit Organizations, Welfare Societies, Religious Institutions etc to claim full tax exemption as per Section 11 and 12 of the Income Tax Act, 1961. The non-profit entities do not work for profit, rather for the welfare of the people and the society, and are hence called non-profit organizations. As their work is considered a selfless act and they essentially do the work that the government ought to do, they are provided with tax exemptions.
If any non-profitable trust or NGO has not registered for 12A, their financial receipts or transactions would be considered as taxable.
Private or family trusts are not allowed such exemptions and cannot obtain 12A registration.
What is Section 12A and 12AB of Income Tax Act ?
What is the difference between section 12AA and section 12AB? Section 12AA regulates the initial registration of charitable organizations, while section 12AB regulates the re-registration and operation of existing organizations