Form 10AC of Income Tax Act: Registration for Charitable and Religious Trusts

Introduction

What is Form 10AC?

The Indian tax regime offers certain exemptions to institutions that work as charitable organizations or trusts. When applying for these exemptions, an institution needs to prove its registration under the said category with Form 10AC of Income Tax Act.

Form 10AC (Income Tax) is issued by the Income Tax Department as proof of registration or approval to certain institutions like trusts, societies, and not-for-profits. This form confirms that the applicant has been granted approval under specific sections of the Income Tax Act for claiming exemptions.

Importance of Form 10AC for Charitable and Religious Institutions

For charitable and religious organisations, Form 10AC of the Income Tax Act provides formal recognition. It validates their status, enabling them to function transparently and allowing donors to claim tax benefits. Without this form, they cannot claim exemption or offer it to donors under relevant sections like 12A or 80G.

Purpose of Form 10AC

Grant of Registration or Approval Under Income Tax Act

Form 10AC income tax registration is granted to entities seeking exemption or deduction from income tax under specific provisions of the law. It formalises their recognition as charitable or scientific institutions and helps them understand where they stand in the context of exemption vs deduction: while exemptions fully exclude certain income from tax, deductions reduce taxable income based on eligible expenses or donations.

Applicable Sections: 12A, 80G, 10(23C), and 35

Approval under Form 10AC is granted under various sections:

• Section 12A: For registration of charitable or religious trusts. It allows complete exemption of income under Sections 11 and 12 if at least 85% of the income is applied to charitable purposes. Without registration under 12A, donations and other receipts become taxable.
• Section 80G: For enabling donors to claim deductions for donations made to specified funds and institutions. The deduction amount can go up to 100% or 50% of the donation, depending on the type of fund. The organisation must have a valid 80G registration at the time of donation for donors to claim the benefit.
• Section 10(23C): For granting tax exemption to educational and medical institutions. If the total annual receipts do not exceed ₹5 crores, these institutions can claim full exemption without separate approval.
• Section 35: For scientific research institutions. This section allows individuals and organisations to claim deductions for revenue and capital expenditure related to approved scientific research.

Why Form 10AC is Important

Mandatory for Claiming Tax Exemption Benefits

Institutions without a valid Form 10AC of Income Tax Act cannot avail tax exemptions. The form acts as the gateway for these benefits under the relevant sections.

Proof of Legal Recognition for Charitable Institutions

The form serves as legal documentation that an entity operates within the permitted boundaries of the Income Tax Act.

Essential for Donors to Claim 80G Deductions

If an organisation doesn’t hold a valid Form 10AC income tax registration under section 80G, donors won’t be able to claim deductions on the donated amount.

Who Can Apply for Registration Under Form 10AC?

Eligibility Criteria for Trusts, Societies, and Institutions

Form 10AC of Income Tax Act is issued to organisations seeking tax-exempt status under sections like 12A, 80G, 10(23C), or 35. This includes charitable trusts, religious institutions, registered societies, and Section 8 companies.

To qualify, the entity must be set up for charitable, religious, educational, medical, or scientific purposes. It should not operate for personal profit. The applicable section depends on the nature of the organisation’s work and the kind of exemption or deduction it aims to offer or receive.

• Section 12A must engage in genuine charitable or religious activities.
• Section 10(23C) includes schools, colleges, and hospitals, especially those with annual receipts not exceeding ₹5 crore.
• Section 80G should be involved in causes that are eligible for donation-based tax deductions.
• Section 35 should be registered for conducting scientific research.

Plus, understanding compliance requirements such as TDS in India is also important, especially when the organisation deals with contractors, professionals, or receives income where tax may need to be deducted at source.

New Registration and Provisional Registration

New organisations can apply for provisional registration through Form 10A, which is valid for three years. This is ideal for recently formed institutions that are yet to establish a track record. Before the provisional period ends, the institution must apply for permanent registration using Form 10AB. If this isn’t done, the registration will lapse, and any associated tax benefits will no longer be applicable.

How is Form 10AC Issued?

Application Process for Registration

You can apply for registration by logging into the official Income Tax e-filing portal and submitting Form 10A (for new or provisional registration) or Form 10AB (for renewal or modification). Along with the form, you’ll need to upload:

• Trust deed or founding documents
• Registration certificates (if applicable under other Acts)
• PAN of trustees or board members
• Audited financials (if applicable)
• Details of charitable or religious activities

After you submit the application, the Income Tax Department reviews the details. If needed, they may ask for more information or documents. 

Timeline and Procedure of Issuance by Income Tax Authorities

After submission, the department usually processes the application within one to two months. On approval, Form 10AC income tax registration is granted.

In case of any future amendments to your trust deed, objects, or operations, you’ll need to inform the jurisdictional Commissioner. The Finance Act, 2022, has also allowed authorities to reassess and cancel the registration if any conditions are violated or if the institution’s activities are not in line with what was claimed during registration.

Details Contained in Form 10AC

Registration Number, Approval Details, Validity Period

Form 10AC issued by the Income Tax Department includes specific identification and registration details of the applicant entity. These include:

• A unique registration number assigned to the trust or institution
• The section under which approval is granted (e.g., 12A, 80G, 10(23C), or 35)
• The date of approval
• The validity period of the registration: three years in case of provisional approval; longer for permanent registration

These details serve as official recognition of the entity’s eligibility for tax exemptions or deductions under the specified section.

Conditions and Compliance Requirements Mentioned in the Form

Form 10AC also outlines the conditions that must be met to retain the granted approval. These compliance requirements include:

• Timely filing of return of income (ROI)
• Maintenance and audit of accounts as per the Income Tax Act
• Use of income strictly for permitted purposes, as declared during registration
• Prior intimation to the Commissioner for any change in the trust deed, MOA, or objectives

The certificate cannot be used to avoid TDS obligations on investments or transactions linked to the trust or institution. Failure to meet these conditions can lead to cancellation of registration and loss of tax benefits.

Validity and Renewal of Form 10AC

Duration of Provisional and Final Registration

Form 10AC provides either provisional or final registration to trusts and institutions:

• Provisional registration is valid for 3 years.
• Final registration is granted for a period of 5 years upon re-application through Form 10AB before the provisional expiry.

Renewal Process After Validity Expires

As per the 6th Amendment Rules, 2021:

• Existing entities registered under Section 12A, 12AA, 10(23C), or 80G must reapply using Form 10A.
• The renewed registration remains valid for 5 years.
• The process involves online filing through the Income Tax portal, along with documents like the trust deed, registration certificates, and audited accounts.
• Once submitted, the Commissioner reviews the application. If satisfied, they issue an updated Form 10AC with a new registration number.

Entities must also comply with Form 10BD (Statement of Donations) and issue Form 10BE (Donation Certificates) annually to maintain Section 80G or 35 benefits.

Recent Clarifications Issued Regarding Form 10AC

CBDT Circulars and Relaxations

The CBDT’s Circular No. 11/2022 clarified that all Form 10ACs issued between April 1, 2021, and June 3, 2022, will now be read in conjunction with the updated conditions, effective from April 1, 2022. These changes apply to registrations under Sections 12AB, 10(23C), and 80G, aligning them with the Finance Act 2022 amendments.

Impact of Amendments on Existing Registrations

The Finance Act 2022 allows tax authorities to examine registered entities for specified violations and cancel registrations through Form 10AD, if needed. Trusts and institutions must follow the revised compliance conditions to retain their approval status.

Consequences of Non-Compliance with Conditions of Form 10AC

Cancellation of Registration

If conditions listed in the form are not followed, the income tax authorities can cancel the registration granted under Form No. 10AC of Income Tax Act.

Impact on Tax Exempt Status

Cancellation of registration results in the loss of tax-exempt status for the institution. It may also impact donor confidence, as contributions would no longer qualify for 80G deductions. In some cases, the income of the institution may be taxed similarly to tax on mutual funds or other taxable entities, depending on how the funds are utilised post-cancellation.

How to Rectify Errors in Form 10AC?

Procedure for Correction or Rectification

If there are any errors in Form 10AC, institutions can file a rectification request through the income tax portal or raise a grievance under the e-Nivaran system.

Common Mistakes to Avoid During Application

• Incorrect PAN or registration details
• Incomplete documentation
• Wrong section selection

Avoiding these can ensure faster approval without future issues.

Conclusion

Complying with the conditions of Form 10AC of the Income Tax Act is necessary for maintaining tax-exempt status and institutional credibility. Whether it’s for enabling donors to receive tax benefits or ensuring smooth approval under relevant sections, having a valid Form 10AC is non-negotiable. 

Just as consistency and compliance matter in areas like stock advisory, charitable institutions must also stay updated with any clarifications or circulars from the CBDT to avoid cancellation or non-renewal of their registration.

FAQs

1. Is Form 10AC applicable for new trusts only?

No, it applies to both new and existing trusts. New entities must obtain provisional registration first, while existing ones need to re-register as per the updated rules.

2. What if my Form 10AC shows incorrect details?

You can file a rectification request on the income tax portal or raise a grievance for correction.

3. Can Form 10AC registration be canceled?

Yes, if conditions are violated or false information is provided, the registration can be canceled. This affects tax benefits for both the institution and its donors.

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