Tax-Free Charitable Income — The Foundation of Every Compliant NGO
Section 12A of the Income Tax Act, 1961 provides income tax exemption to charitable and religious trusts, NGOs, and Section 8 companies on their income — to the extent it is accumulated or set aside for charitable or religious purposes. Without 12A registration, every rupee of income received by an NGO (including donations, grants, and even bank interest) is fully taxable at the maximum marginal rate (approximately 30% + surcharge). 12A registration is therefore the single most important tax compliance requirement for any NGO immediately after its formation.
The Finance Act, 2020 brought landmark changes to the 12A/80G framework — making both registrations time-limited (renewable every 5 years instead of permanent as before), introducing provisional registration (3 months validity for new entities), and requiring re-registration for all existing registrants. All organisations registered under the old 12A regime must have obtained fresh registration under the new Section 12AB framework. VITTAX tracks these renewal deadlines for all client NGOs and files on time to avoid lapsing of exemption status.
Post-registration, the trust must apply its income toward charitable purposes, maintain proper accounts, file annual ITR-7, and comply with the conditions of the registration — including not engaging in any activity for the benefit of a particular religious community (for trusts claiming exemption under Section 11/12).
Charitable Trusts
Public charitable trusts registered under Sub-Registrar or Charity Commissioner
Registered Societies
Societies registered under the Societies Registration Act
Section 8 Companies
Section 8 Companies incorporated under the Companies Act, 2013
Religious Institutions
Religious trusts and institutions receiving donations from devotees
Re-Registration
Existing NGOs whose 12A registration was granted before 2021 and requires renewal under 12AB
Application on Income Tax Portal
1–2 daysFile Form 10A (for new/provisional registration) or Form 10AB (for final registration after 1 year of activity) online on the Income Tax portal using DSC or Aadhaar OTP.
Document Upload
1–2 daysUpload registration documents, Trust Deed / MOA, audited accounts (if applicable), activity details, and the list of governing board members.
Principal Commissioner Review
1–3 monthsThe Principal Commissioner of Income Tax (Exemptions) reviews the application. May call for additional documents or a hearing.
Provisional Registration (New Entities)
Within 30 days typicallyFor newly registered NGOs, a 3-year provisional 12A registration is granted. The NGO must apply for final registration before the end of the provisional period.
Final Registration
1–3 monthsAfter demonstrating 1–2 years of genuine charitable activity, apply for final 5-year registration using Form 10AB.
Registration & Governing Documents
Financial & Activity Documents
Property (if applicable)
Pricing Plans
12A Provisional Registration
₹6,999 one-time
For newly formed NGOs (Form 10A)
Ideal for: Newly formed trusts, societies, and Section 8 companies within first year of activity
12A Final Registration
₹9,999 one-time
For NGOs completing provisional period (Form 10AB)
Ideal for: NGOs completing 1–2 years of activity under provisional 12A registration
12A Re-Registration
₹12,499 one-time
For existing NGOs renewing under the new 12AB framework
Ideal for: All NGOs that received 12A registration before 2021 needing migration to 12AB
Frequently Asked Questions
What is the difference between Section 11/12 and Section 10(23C)?
Section 11/12 exemption applies to general public charitable and religious trusts that are registered under Section 12A/12AB. Section 10(23C) applies to specifically notified organisations — universities, hospitals, and certain educational institutions notified by the Central Government. Most small-to-medium NGOs and trusts register under Section 12A.
How much of the income must the NGO spend to get the exemption?
Under Section 11, a trust must apply at least 85% of its income toward charitable purposes in the same year to get the full exemption. The remaining up to 15% can be accumulated without specific approval. Amounts not spent can be accumulated under Section 11(2) for up to 5 years with PCIT notification.
What happens if the 12A registration lapses?
If the 12A/12AB registration lapses (due to non-renewal), all income of the NGO becomes fully taxable immediately. Additionally, donors who contributed during the lapsed period lose their 80G deduction. Lapsing is a critical risk — VITTAX proactively alerts all clients 6 months before the renewal deadline.
Can a trust that engaged in business activities still get 12A?
Yes — provided the business is incidental to the main charitable purpose, and the entire income from business is applied toward charitable purposes. However, if the trust engages in commercial activities as its primary purpose, 12A registration may be denied or cancelled.
⚡ 12A Covers
Donations & grants tax-free, provisional + final registration, ITR-7 filing included — the foundation of every compliant NGO