Having to reapply for IT registration, NGOs say Finance Bill MHA-inspired

In a blow for the social sector in the Union Budget 2020-21, charitable trusts will have to reapply for Income Tax registration.

"Remember when registration under FCRA 1976 and later even FCRA 2010 renewal was not required. However, Foreign Contribution Regulation Rules 2015 brought in the system of five years validity and renewal. Well Finance Bill 2020 seems to have drawn inspiration from the Ministry of Home Affairs," Noshir H. Dadrawala of the Centre for Advancement of Philanthrophy said.

As per the Budget documents, charitable trusts and institution which are already registered under section 12A or 12AA of Income Tax Act 1961 will now be required to re-apply online for registration and approval by August 31, 2020. An order granting registration/approval shall be passed within 3 months of the application. Such registration approval shall be valid for 5 years.

Many NGOs have Section 12A registrations going back several decades. Once registered, one did not have to renew it. Registration under 12A or 12AA meant, income of the trust or institution was exempt from income tax subject to various compliance under sections 2(15), 11, 12 and 13 etc., of the Income Tax Act 1961.

Similarly, charitable trusts and institution which already have Section 80G certificate will now be required to re-apply online for registration/approval by August 31. An order granting registration shall be passed within 3 months of the application and will be valid for 5 years.

Dadrawala, in a note to NGOs, said: "Remember the time, we had to renew our 80G certificate every three to five years until an amendment under Finance Act 2009 made all 80G certificates expiring after 1st October 2009 valid in perpetuity unless specifically cancelled or revoked under gazette notification?"

Under Section 80G, a tax paying donor can claim tax deduction on income liable to tax.

"The moment we read the Finance Bill 2020 and its ominous proposals, our heart sank, despite our having warned one and all about new horrors that the Finance Bill 2020 would unleash on the voluntary/social sector.

"We reiterate our strongly held belief: Governing a non-profit charitable trust or institution is far more complex and complicated than running a for-profit business. There may be ease of doing business. But, there is no ease of doing charity.

"The ancient curse: 'May you live in interesting times' is upon us. Stay strong. This too shall pass!", Dadrawala added.

( With inputs from IANS )