At least 2.17 lakh NGOs, charitable and religious trusts will have to apply for re-registration with the Income Tax (I-T) Department, which will look at past records and work objective of these organisations and decide whether they should be allowed tax exemptions.
The whole exercise of re-validation/re-registration following the recent amendment to I-T laws has raised concern among both NGOs and the already overburdened tax officials, sources said.
The amendment in Section 12A and the newly introduced Section 12AA of Finance Bill, 2020, do away with perpetual registrations of charitable organisations and NGOs with the I-T Department. From June, all existing registered organisations will need to apply for fresh registration, which will now be renewed every five years.
Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP, said: “Typically, these institutions are allowed exemption under Sections 11 and 12 of I-T Act. So the consequence of losing this registration or not applying for re-registration shall be that the institution will lose this tax exemption and the surplus generated by them will be subject to tax in India. Even expenditure by these trusts may get disallowed, as they won’t qualify for deduction.”