Charitable trusts, religious institutions, NGOs, and similar entities registered under Sections 12A/12AA/12AB are under an important obligation. The law requires renewal of their registration, failing which they risk losing tax‐exempt status and related benefits. For most of those trusts, 30th Sep is the due date for application to continue the benefit of exemption for next 5 or 10 years as the case may be.
Below is a concise guide to what has changed, what must be done, and what happens if you don’t comply.
What Has Changed: Finance Act, 2025 – 10‑Year Validity for Some Trusts
1. Background of Section 12AB
– Starting 1 April 2021, registrations under Sections 12A/12AA were replaced by the new regime under Section 12AB of the Income‑tax Act, 1961 for both fresh registrations and re‑registrations of existing charitable/religious trusts.
– Under the earlier regime (after transition), trusts got provisional registration for 3 years, then a permanent registration with 5‑year validity which must be renewed.
2. Finance Act, 2025 Amendment
– The Finance Act, 2025 introduced a proviso that allows certain trusts/institutions whose total income (before exemptions under Sections 11 & 12) does not exceed ₹5 crore in each of the two preceding financial years to obtain registration under Section 12AB for 10 years instead of 5 years.
– This change is effective from 1 April 2025.
What Trusts Must Do by 30 September 2025
If your trust’s registration under Section 12AB is valid up to 31 March 2026, you must apply for renewal by 30 September 2025. The law mandates that renewal application should be filed at least six months before expiry. Even if eligible for 10‑year validity, you still must submit renewal (under Form 10AB) by that deadline to claim the longer period. The extension is not automatic.
Consequences of Non‑Compliance
– The exemption under Sections 11 & 12 may lapse after 31 March 2026.
– Donors may lose deductions under Section 80G, if applicable.
– The trust may be considered “non‑charitable” for tax purposes, and its income may become taxable.
Action Plan: What You Should Do
Step | What to Check / Do |
1. Assess Income | Calculate total income without giving effect to Sections 11 & 12 for the two preceding financial years. If it is ≤ ₹5 crore in each, you may qualify for 10‑year validity. |
2. Gather Documents | Audited statements, trust deed, trustee details (PAN/Aadhaar), existing registration certificate, activity reports, etc. |
3. File Renewal Application | Use Form 10AB via the Income Tax Department portal before 30 September 2025. Ensure application is six months before expiry. |
4. Choose Validity Period | When filing, invoke the proviso under Finance Act, 2025 for 10‑year validity if eligible. Otherwise, renewal will be for 5 years. |
5. Maintain Compliance | Continue meeting requirements under Section 11/12 (use of funds, audit, reporting), so renewal is granted smoothly. |
Legal References & Notifications
– Finance Act, 2025: amendment providing 10‑year validity for eligible trusts under Section 12AB.
– Income Tax Act, 1961, Section 12AB and its sub‑section 1(ac): sets out registration, renewal and validity periods.
– Public advisories and news reminders from Tax Department.
Summary & Recommendation
– If your trust/institution is registered under Section 12AB and the registration expires on 31 March 2026, apply for renewal by 30 September 2025.
– If your trust qualifies (income ≤ ₹5 crore for two previous years), take advantage of the law change to obtain 10‑year validity.
– Failure to renew can mean losing your tax‑exempt status, donor deduction eligibility, and incurring unintended tax liabilities.
