Section 12A

Introduction

Section 12A of the Income Tax Act is important to Indian tax law. It sets out the rules for calculating taxes on income from different sources, such as salary and investments. This section also addresses certain exemptions from taxes, deductions, and credits allowed to taxpayers. Understanding this section is essential for taxpayers who wish to comply with their tax obligations in India. This article will look at the key provisions of Section 12A and its implications for taxpayers.

In addition to providing an overview of Section 12A, this article will highlight some important points taxpayers should remember while filing their taxes.
 

What is Section 12A Income Tax Act?

Section 12A of the Income Tax Act governs income taxation in India. It defines how income should be taxed, what deductions and credits are allowed, and when certain exemptions may apply.

Income is classified into different categories, including salary, business income, dividends or interest earned from investments, capital gains/ losses on the sale of assets, rent received, etc. Section 12A sets out rules for calculating taxes on each type of income. 12A income tax exemption, deductions, and credits are applicable to all types of income.

As this section provides, taxpayers can also avail certain tax deductions and exemptions. These include deductions for expenditures incurred in earning one's income (such as advertising expenses), interest on home loans up to a certain limit, donations made to charitable institutions, etc.
 

Eligibility Criteria

Section 12A applies to all Indian taxpayers, regardless of their income level. However, certain conditions must be met for a taxpayer to qualify for the deductions or exemptions provided under this section.

For instance, those who wish to avail of the deduction for home loan interest payments need to have taken out a loan before the start of the financial year to be eligible. Similarly, any donations made must be eligible according to Section 80G of the IT, Income Tax Act and meet certain other criteria.
 

Benefits Under Section 12A

Section 12A provides taxpayers with several benefits. Taxpayers can avail of deductions and exemptions that can significantly reduce their tax burden. In addition, certain investments made by taxpayers may qualify for special tax treatment under Section 12A.

12A income tax exemption can be availed by resident individuals, Hindu Undivided Families (HUF), firms, associations of persons, companies and other entities on incomes derived from various sources.
 

Steps to File 10A Form Online

1.    Log in to the portal of e-filing portal of the IT-Income Tax Department using your Permanent Account Number (PAN).

2.    Select 'Income Tax Returns' from the dashboard.

3.    Choose 'ITR10A' from the list of forms available and click on 'Prepare and Submit Online.'

4.    Follow the instructions present on the screen to fill out all relevant details related to your income, deductions, exemptions, etc.

5.    Upload any necessary supporting documents, such as bank statements or investment proofs, if required.

6.    Preview your ITR form before submitting it online, along with a digital signature if applicable.

7.    Once you have submitted the form successfully, you will receive an acknowledgment number which you can use to track the status of return.

8.    You can also make any necessary changes or corrections to your form before filing by going back and making changes in the 'Edit' mode.

9.    Once all the details are correct, click 'Submit' to file your return online.

10.    Take a printout of your ITR-V acknowledgment for future reference.
 

12A Income Tax Act Registration – Documents Required

1.    PAN Card

A Permanent Account Number (PAN) is a unique 10-digit number issued by the Income Tax Department to taxpayers in India. 

2.    Bank Statements

Bank statements must verify payments made towards any investments, expenses, or donations that can be claimed as deductions or exemptions under this law section.

3.    Investment Proofs

Any investments made during the financial year must be supported with proofs such as investment documents, share certificates, etc

4.    Donation Receipts

Donations made to registered charitable institutions are eligible for deductions and exemptions under Section 12A of the Income Tax Act. 
 

Steps to Obtain 12A Registration

1.    Apply for registration under Section 12A of the Income Tax Act to the assessing officer in charge of your jurisdiction.

2.    Along with the application, submit all required documents such as PAN card, bank statements, investment proofs, and other relevant papers.

3.    In case your application is rejected, you can re-apply after correcting any discrepancies or providing additional documents that may be required.

4.    Once you have obtained your 12A Registration Number, remember to update it in the relevant section of your Income Tax Return form when filing taxes each year to avail of applicable deductions and exemptions under Section 12A of the Income Tax Act.
 

Difference Between 12A Vs. 12AA of Income Tax

1.    Section 12A of the Income Tax Act 1961 deals with the registration of charitable or religious trusts and institutions, while Section 12AA is related to the approval of such organizations by the Commissioner of Income Tax (CIT).

2.    Organizations registered under Section 12A are not necessarily approved for tax benefits under Section 12AA, as CIT has to obtain approval after fulfilling certain conditions specified in this section.

3.    Organizations that fulfill the criteria mentioned in rule 17BB may apply for approval to avail income tax exemption under this section, which the CIT can grant for up to 5 years.

4.    The application must also be accompanied by documents such as a charter or memorandum of association, trust deed, and registration certificate from the Charity Commissioner, among others.

5.    Organizations approved for tax exemption under Section 12AA will be exempted from paying income tax on any donations received or income earned by them per the Income Tax Act 1961.
 

Process For Online Revalidation Under Section 12A Using Form No. 10A

1.    Organizations registered under Section 12A of the Income Tax Act 1961 must submit an online application for revalidation in Form No.10A before their registration expires every 5 years.

2.    The application must be accompanied by documents such as an updated PAN card, audited financial statements, and documents related to any new investments made during the financial year.

3.    Organizations that successfully revalidate their registration will receive an acknowledgment letter and a new 12A Registration Number, which they must quote while filing taxes in the relevant section of the Income Tax Return form every financial year.
 

What are the recent amendments under Section 12A

●    Any amount paid to an organization or trust registered under Section 12AA will not be considered a contribution towards religious or charitable causes.

●    Donations to trusts and organizations registered under Section 12A of the Income Tax Act cannot be used as an income source.

●    According to the Second Amendment, if a trust or organization registered with Section 12A has undertaken any changes that do not meet registration guidelines, they must request a new registration within thirty days of making those modifications.

●    According to the next amendment, if an individual receives any property from a trust or organization without providing anything in return, it must be declared taxable income under 'income from other sources.
 

What are the terms and guidelines for NGOs and Charitable Organisations?

1.    NGOs and Charitable Organisations must register under Section 12A of the IT, Income Tax Act 1961 to be eligible for tax benefits.

2.    The NGO or charitable organization should not indulge in any activities that are illegal, immoral, religious, or political.

3.    The organization must submit an online application for revalidation in Form No.10A before the registration expires every 5 years.

4.    The organization must comply with all applicable laws per the Income Tax Act 1961.

5.    The organization must ensure that all donations made are eligible for deduction under Sections 80G and Section 35AC of the Income Tax Act 1961, if applicable.
 

Conclusion

To summarise, Section 12A of the Income Tax Act 1961 deals with registering charitable or religious trusts and institutions, with approval for tax benefits under Section 12AA being granted to those that fulfill certain conditions specified in this section.