1. Charitable Trust and NGO: Tax Exemption Framework
Charitable trusts, registered societies, and Section 8 companies can obtain tax exemption under ITA 2025 — making their income from charitable activities exempt from income tax. There are two separate registrations required: 12AB registration (for the trust income to be exempt) and 80G registration (for donors to get deduction on their donations). Both are now obtained online through the IT Portal.
2. Section 136 (12AB): Trust Income Exemption
To claim exemption on trust income, the trust must obtain 12AB registration from the jurisdictional Principal Commissioner of Income Tax:
- Form 10A: online application on IT Portal
- Documents: trust deed/memorandum, PAN, objects of trust, list of trustees, bank accounts, audited financials
- Provisional registration: granted for 3 years for new trusts — then must apply for final registration
- Final registration: for 5 years (renewable); requires activity report and financials
- Once registered: income "applied" for charitable purposes is exempt from tax
- Accumulation: up to 15% of income can be accumulated without immediate application (Form 9A must be filed)
3. Section 135 (80G): Donor Deduction
80G registration allows donors to claim deduction on their donations. The trust must separately apply for 80G registration. The deduction available to donors depends on the category of the trust:
- Approved trusts under 80G: 50% of donation with qualifying limit (10% of ATI)
- Certain national funds: 100% without limit (PM-CARES, PMNRF etc.)
- The trust must file Form 10BD (statement of donations received) and issue Form 10BE (donation certificate) to donors
4. What is Charitable Purpose?
Schedule VII of ITA 2025 (equivalent to Section 2(15) of ITA 1961) defines charitable purpose:
- Relief of the poor
- Education
- Yoga
- Medical relief
- Preservation of environment (ecology, forests, wildlife)
- Preservation of monuments of historic importance
- Any other object of general public utility
"General public utility" is restricted: activities for the benefit of a specific community or group only (not general public) may not qualify. Commercial activities (even if incidental) above a threshold can disqualify the charitable purpose claim.
5. Compliance Requirements After Registration
| Requirement | Filing | Due Date |
|---|---|---|
| Annual return of trust | ITR-7 | 31 October (audit cases) |
| Audit of accounts (if income > Rs 2.5L) | Form 10B/10BB | 30 September |
| Statement of donations received | Form 10BD | 31 May |
| Accumulation report (if accumulating >15%) | Form 9A / Form 10 | 31 October |
| Foreign contribution report (if FCRA registered) | FC-4 | 31 December |
6. FCRA: Foreign Contributions
Charitable trusts and NGOs receiving foreign donations must separately register under the Foreign Contribution (Regulation) Act (FCRA) with the Ministry of Home Affairs. FCRA registration is mandatory for any foreign donation — without it, the foreign contribution is illegal. FCRA-registered organisations must maintain a designated bank account (State Bank of India, New Delhi Main Branch), file annual FC-4 returns, and use foreign contributions only for declared purposes.
7. Corpus Donations
Donations specifically made to the corpus of the trust (with donor intent to build the permanent corpus) are treated differently — they are not "income applied" but additions to corpus. Corpus donations are exempt and not included in "income" for the year. This allows large capital donations to be accepted without disturbing the income-application ratio.
8. Common Compliance Pitfalls
- Not filing Form 10BD: donors cannot claim 80G deduction even if the trust has valid registration
- Religious activities beyond permissible limits: reduces charitable purpose claim
- Accumulation beyond 15% without proper Form 9A: entire accumulated income becomes taxable
- Delayed 12AB renewal: exemption lapses; income becomes taxable
- Accepting foreign donation without FCRA: illegal; trust/trustees liable for prosecution
9. Why TaxClue
Trust and NGO compliance — 12AB/80G registration, ITR-7, Form 10BD, FCRA — is highly specialised. TaxClue assists with registration, annual compliance, and donor certificate issuance. Contact us for NGO/trust advisory under ITA 2025.