INCOME TAX - REGISTRATION PROCEDURE
01 Income tax was first introduced in India in 1860. In those days income related with charitable purposes were totally exempt from tax. Over the years the Income Tax Act underwent radical changes, basically to ensure that such exemptions are not misused by unscrupulous elements. Currently extensive exemptions are still available to NGOs but a host of regulatory provisions have been incorporated in the act, which are to be adhered to, in order to claim exemptions.
APPLICATION FOR REGISTRATION
02 In order to claim exemption, an NGO should make an application to the Commissioner of Income Tax for registration of the NGO. Such application is to be made in Form 10A. The following documents are required to be submitted :
i) Form 10A
ii) The original instrument under which the NGO is established, or the Bye Laws & Memorandum of Association evidencing the creation of the NGO should be enclosed.
iii) Two copies of the Accounts of 3 previous years should be enclosed. Where the NGO was not in existence in any of three prior years, copies of the accounts of lesser No. of years may be submitted.
TIME LIMIT FOR MAKING AN APPLICATION
03 Provisions prior to 1st June 2007
Prior to the changes made by Finance Act 2007, the application for registration by an organization should have been made before expiry of one year from the date of creation of an organization. Organisation which made delayed application was allowed exemption with effect from the 1st day of the previous year in which application is made. The Commissioner of Income Tax had power to condone the delay in filing application.
04 Provisions after to 1st June 2007
The above provisions were amended by the Finance Act 2007. According to the amendment, the power of the Commissioner of Income Tax (CIT) to condone the delay has been withdrawn w.e.f. 1st June 2007.
05 Implications of the above amendment
Any delay in the filing of application for registration by the organisations cannot be condoned by the CIT. The exemption shall be given from the 1st day of the previous year in which the application was made and if the organisation has any income in the previous years prior to filing the application, shall be subject to tax. Thus the onus of availing exemption of Income from the Income Tax Department lies on the organisation itself.
THE AUTHORITY TO WHOM APPLICATION IS TO BE MADE
06 The application is to be submitted Income Tax - Registration Procedure to the Commissioner of Income Tax in whose area the NGO is located. However, in respect of the four metropolitan cities of Calcutta, Chennai, Delhi & Mumbai, the applications are to be made to the Director of Income Tax (Exemption).
GRANTING & REFUSAL
07 The Commissioner of Income Tax, on receipt of an application for registration of an NGO, shall call for such documents or information, as he thinks necessary. While processing such application, the concerned authority normally concentrates on the genuineness of the NGO. Once the genuineness of the activities & creation is established, then it is incumbent upon the authority to pass an order in writing, registering the NGO.