Question ID : 44819

Trust - Regular registration

A trust which has been in existence for 3 years, not registered, applied for registration and was granted the same u/s 12(ac)(vi) (b) from 2024-25 to 2028-29. The charitable activities has been ongoing since 3 years. Should the trust apply for regular registration now and also request for condonation ( since 6 months has already elapsed from the commencement of charitable activities) or should the application be made only by 2028-29? For the past 3 years return has been filed and tax paid at MMR. Thank you.

The trust must apply for regular registration immediately under Section 12AB(1)(b) and seek condonation for the delay, rather than waiting until 2028-29. Here’s the analysis: Key Considerations 1. Provisional Registration Validity: The trust’s provisional registration under Section 12A(1)(ac)(vi)(b) is valid until 2028-29. However, provisional registration does not grant full exemption benefits under Sections 11/12. To claim exemptions, the trust must obtain regular registration. 2. Timeline for Regular Registration: - As per Section 12AB(1)(b), trusts with provisional registration must apply for regular registration at least six months before the provisional registration expires or within six months of commencing activities. - Since the trust has been operating for three years, the six-month window from the start of activities has lapsed. This triggers the need for condonation of delay. 3. Condonation of Delay (2024 Amendment): - The Finance (No. 2) Bill 2024 empowers the Commissioner to condone delays in filing applications if there is a "reasonable cause". - The trust must file an application for regular registration now and explicitly request condonation for missing the six-month deadline. If approved, the application will be treated as timely filed. 4. Consequences of Delay: - Failure to secure regular registration risks taxation of accreted income under Chapter XII-EB (30% tax on "accreted income") and permanent loss of tax-exempt status. - The trust’s past returns (filed at Maximum Marginal Rate) may face scrutiny if exemptions are later claimed retroactively. Recommended Steps 1. File Form 10A/10AB: Submit an application for regular registration under Section 12AB(1)(b) via Form 10AB, including: - Audited financial statements for the past three years. - Documentation of charitable activities. - A written request for condonation of delay, justifying the reasons (e.g., ongoing compliance efforts, administrative delays). 2. Engage with the Commissioner: Highlight the trust’s operational history, tax compliance, and charitable impact to strengthen the condonation request. 3. Monitor Timelines: The Commissioner must pass an order within three months of receiving the application[1][3]. Provisional registration remains valid until a decision is made. Conclusion: The trust cannot wait until 2028-29. Immediate action is required to secure regular registration and condonation. This ensures compliance with the Income Tax Act’s updated provisions and safeguards future tax-exempt status. Delaying risks permanent loss of exemptions and additional tax liabilities under Chapter XII-EB[1][2][3].