Comprehensive Guide to Form No. 10A - Trust Re-registration Process

Form 10A is an essential document for the re-registration of trusts in India. It is a crucial procedure that trusts, or organizations must adhere to maintain their activities' legality and validity. Re-registering a belief is necessary to ensure compliance with the Government's rules and regulations. Failure to comply with the requirements can lead to penalties and legal consequences. The Finance Acts of 2020 and 2021 introduced amendments to the laws governing the registration and authorization of trusts under the Income Tax Act of 1961. Section 12AB was added to enhance the effectiveness of trust registration. According to the amendment, trusts must transition from the previous Section 12AA to the new Section 12AB and obtain a new registration. In this article, we will explore the mandatory requirement of filling out Form 10A for trust registration and discuss the process for its completion.

The Legal Framework of Trusts in India

The British colonial administration in India adopted the Indian Trust Act of 1882 to establish a legal framework for creating and administrating trusts. A trust is a legal document where a person, known as the settler, transfers property ownership to another person or group of people, known as trustees. The trustees hold and manage the property for the benefit of another person, the beneficiary. The trustee oversees the trust property and ensures compliance with the settler's instructions.

The Legal Framework of Trusts in India

In India, the Indian Trusts Act of 1882 governs trusts and provides guidelines for their formation and management. This legislation outlines the obligations and authority of trustees over the trust property. It also serves as a mechanism for resolving disputes between trustees and beneficiaries of the trust. The trust agreement must specify the property held in trust and detail how the trustee will manage it.

The Importance of Trust Management in India

Trusts are commonly utilized in India for wealth management and preservation. They are often employed in estate planning, tax planning, and charitable giving. Trusts offer a means to safeguard wealth for future generations while ensuring that the property is utilized for its intended purpose.

Who Can Create a Trust?

Trust can be created by

Individuals: Any person capable of entering into contracts, such as individuals of legal age and sound mind, can create trust.
Association of Persons (AOPs) and Hindu Undivided Families (HUFs): AOPs and HUFs are also eligible to create a trust.
Minors: If a trust is to be established by or on behalf of a minor, obtaining the consent of a Principal Civil Court with original jurisdiction is necessary.

The ability to create trust depends on the laws in effect at the time and the extent to which the trust's creator intends to dispose of their assets.

Types of Trusts in India

Private Trusts

Private trusts are established for a specific closed group of individuals who can be identified as beneficiaries. For example, a private trust created for the benefit of the author's friends and family would be a trust.

Public Trusts

Public trusts are created to benefit a large group or the general public. These trusts are often associated with charitable institutions run by non-profit NGOs that serve the general population's welfare. It is important to note that while at least two individuals are required to establish a trust, a society or organization seeking to develop a trust must have at least seven members.

Transition and Re-registration of Trusts under Section 12AB

In India, Section 12AA and Section 12AB are provisions under the Income Tax Act that deal with registration and tax-exempt status for charitable and religious trusts. Section 12AA pertains to the initial registration of such trusts, while Section 12AB relates to the re-registration process introduced in 2020. Previously, trusts seeking tax-exempt status would apply for registration under Section 12AA. However, with the amendment, all existing trusts registered under Section 12AA must transition to the new Section 12AB and obtain a new registration.

Form 10A

The Central Board of Direct Taxes (CBDT) introduced Form 10A to facilitate the migration of registrations for trusts and NGOs to the new registration system under Section 12AB. Form 10A is designed explicitly for trust registration applications and serves the following purpose es:

Previously Registered Trusts or Institutions: For trusts or institutions already registered under section 12A or section 12AA before April 1, 2021, Form 10A is used to apply for the migration of their registrations to the new system.
Newly Created Trusts or Institutions: For newly established trusts or institutions seeking provisional registration under section 12AB, Form 10A is used to apply for registration.

All trusts, organizations, institutions, funds, and hospitals registered under Sections 12A, 80G, or 12AA of the Income Tax Act are required by the CBDT to obtain new registrations in the prescribed form as per Section 10(23C) of the Income Tax Act. Applicants must submit the Form 10A application to the Principal Commissioner or another designated Commissioner by the CBDT within the specified deadline.

Importance of Form 10A in Trust Registration

Form 10A is a document introduced as part of the revised legislation governing trust registration in India. It was incorporated to facilitate the process of trust re-registration and provide a standardized method for updating trust records. Form 10A ensures that all trusts in India comply with the rules and regulations set by the Indian Government. The main objective of Form 10A is to gather essential information about the trust, including details about the trustees, beneficiaries, and the trust's property. By completing this form, trusts can update their records and ensure the accuracy and currency of the information provided. The trustees are responsible for accurately filling out the form and providing all required information.

Purpose of Form 10A

As mentioned above, Form 10A serves different purposes depending on the status of the trust.

For already registered trusts, the form is used for re-application and re-registration.
For newly formed trusts, it serves as the initial application for registration.

The form consists of six sections, each requiring specific information. These sections cover aspects such as the trust's incorporation and constitution, details of essential individuals, assets and liabilities, other registrations (if applicable), and income and religious activities (if applicable). Overall, Form 10A streamlines the process of trust registration and provides a standardized approach for updating trust records in India while ensuring compliance with government regulations.

Eligible Applicants to File Form 10A

The following organizations must file Form No. 10A to register under Section 12A of the Income Tax Act:

Already Registered Organizations: Organizations previously registered under either of the former sections 12A or 12AA before April 1, 2021, must submit a Form No. 10A application for re-registration under section 12AB.
Existing Unregistered Organizations: Organizations that have already commenced their charitable activities but were not registered with the income-tax authority under any former sections 12A or 12AA before April 1, 2021, must submit a new registration application in Form No. 10A under section 12AB. These organizations will be granted provisional registration for a maximum period of three years.
Newly Established Organizations: Newly established organizations seeking to qualify for an exemption under Sections 11 and 12 of the Income-tax Act must submit Form No. 10A, Application for Provisional Registration, to register with the income tax authority.

Importance of Trust Registration

Legal Recognition and Separate Entity: Trust registration provides the trust with legal recognition and establishes it as a separate legal entity. This is crucial for conducting various activities of the trust.
Compliance with Government Regulations: Registration ensures that the trust operates following all the rules and regulations set forth by the Government.
Tax Liability Determination: Trusts are subject to taxation. Registering the trust helps determine its tax liability and ensures compliance with tax laws.
Transparency and Accountability: Registration makes the activities and financial transactions of the trust public. This promotes transparency, accountability and ensures that trusts are utilized for their intended purposes.
Proof of Ownership: Registering the trust provides evidence of ownership of trust property. This documentation is essential for trustees to administer the property effectively.
Facilitates Transactions and Resource Access: With a separate legal identity, registered trusts find it easier to carry out transactions and access resources necessary for their operations.

Prepare the Required Documents:

Gather the necessary documents for Form 10A, which include the Registration and Incorporation certificate of the trust, PAN Card, digital signatures of trustees, Trust Deed, Memorandum of Association (MoA), and Article of Association (AoA), annual accounts for the preceding three financial years or since the incorporation of the trust, self-certified copy of the Audit Report as per section 44AB, and certificates such as 12A, 12AA, and 80G. If applicable, include the registration certificate under the Foreign Contribution (Regulation) Act, 2010.

Procedure for Filing Form 10A

Access the Income Tax Website: Visit the official website of the Income Tax Department.
Login and Select the Form: Log in using the PAN Card number and password. Choose "File Income Tax Form" under the "File" section.
Select Form 10A: Select the option "Persons not dependent on any Source of Income (Source of Income not relevant)" and then choose "Form 10A – Application for registration or provisional registration or intimation" from the available options.
Provide Details and Save: Select the appropriate Assessment Year from the drop-down menu. Fill in all the required information in the form and save the progress as you proceed.
Submit the Form: Click the "Submit" button to complete the submission process.

Suppose any additional information or documents are required, or inconsistencies are found in the application. In that case, the Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT) may request a hearing or further documentation. If inconsistencies are discovered, the approval granted in Form 10A may be rescinded, rendering it null and void. In conclusion, re-registering a trust involves completing and submitting Form 10A online through the Income Tax Department's website. Ensuring all the required documents are attached and the form is filled out accurately to avoid penalties or legal consequences is crucial. Trust re-registration ensures compliance with regulations, maintains the trust's legal identity, and enables proper management of trust property.