B.—Special provisions for registered non-profit organisation I.––Registration

Application for registration.

332(1)

The following persons may, for claiming benefits under this Part as a registered non-profit organisation, make an application for registration in such form and manner, as prescribed, to the Principal Commissioner or Commissioner:––

• (a) a public trust;
• (b) a society registered under the Societies Registration Act, 1860, or under any law in force in India;
• (c) a company registered under section 8 of the Companies Act, 2013 or the companies registered under section 25 of the Companies Act, 1956 and deemed to have been registered in pursuance of section 465 (2)(g) of the Companies Act, 2013;
• (d) a University established by law or any other educational institution affiliated thereto or recognised by the Government;
• (e) an institution financed wholly or in part by the Government or a local authority;
• (f) any person as referred to in Schedule III (Table: Sl. No. 27) to (Table: Sl. No. 29) and (Table: Sl. No. 36) and in Schedule VII (Table: Sl. No. 10) to (Table: Sl. No. 19) and (Table: Sl. No. 42); or (g) any other person notified by the Board.

332(2)

A person referred to in sub-section (1) shall be eligible for registration, if––

• (a) such person is constituted or registered or incorporated in India for carrying out one or more charitable purposes, as referred to in section 2(23) or one or more public religious purposes, or both; and
• (b) the properties of such person are held under an irrevocable trust for the benefit of the general public,–– (i) wholly for charitable or religious purposes; or (ii) partly for charitable or religious purposes in India, if such person was constituted or registered or incorporated prior to the commencement of the Income-tax Act, 1961.

332(3)

Every application in respect of the cases specified in column B of the Table below shall be made to the Principal Commissioner or Commissioner within the time provided in column C of the said Table, who shall, on receipt of such application, follow the procedure provided in sub-sections (6) and (7) and shall pass an order within the time specified in column D of the said Table, and registration, if granted,shall be valid for a period specified in column E thereof. --TABLE--

332(4)

In case the application under sub-section (3) is made beyond the time allowed in column C of the Table specified in the said sub-section, the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in furnishing the application, condone such delay and such application shall be deemed to have been made within time.

332(5)

In case the application is made under sub-section (3)(Table: Sl. Nos. 3 to 7), and the total income of such applicant, without giving effect to the provisions of this Part, does not exceed five crore rupees during each of the two tax years, preceding the tax year in which such application is made, the provisions of (Table: Sl. Nos. 3.E to 7.E) of the said sub-section, shall have effect as if for the words “five years”, the words “ten years” had been substituted.

332(6)

If any application for registration is not made within the time specified in sub-section (3)(Table: Sl. No. 3.C, 4.C, 5.C or 7.C) and the delay in filing such application is not condoned under sub-section (4), such person shall be liable to pay tax on accreted income under section 352.

332(7)

The Principal Commissioner or Commissioner shall, on an application made by an applicant in any of the cases specified in sub-section (3)(Table: Sl. Nos. 2 to 7), call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself as to the compliance of such requirements of any other law as are material for the purpose of achieving its objects, and the genuineness of activities and––

• (a) if he is so satisfied about the objects and the genuineness of the activities and compliance of the requirements of any other law in force, shall pass an order granting registration; or
• (b) if he is not so satisfied, after affording a reasonable opportunity of being heard to the applicant shall,– (i) pass an order rejecting the application, where the application was made in the any of the cases specified in sub-section (3) (Table: Sl. No. 2 or 6); or (ii) pass an order in writing rejecting the application and also cancelling the registration in any other case specified in sub-section (3)(Table: Sl. Nos. 3, 4, 5 or 7), and send a copy of the said order to the applicant and the Assessing Officer.

332(8)

Where an application has been made in any of the cases specified in sub-section (3)(Table: Sl. No. 1), the Principal Commissioner or Commissioner shall grant provisional registration.

332(9)

Where the registration of a person, registered prior to the 1st April, 2021 under the specified provision of the Income-tax Act, 1961 has expired and such person makes an application for registration under this Part, the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in making such application, condone such delay and grant registration to such person under this Part within three months from the end of the month in which the application is made, which shall be valid for five years from the commencement of the tax year 2021-2022.

332(10)

The order under sub-sections (7), (8) and (9) shall be passed in the form and manner, as prescribed.

Explanation

Section Summary:

This section outlines the process for non-profit organizations (NPOs) to apply for registration to claim tax benefits under the Income Tax Act. It specifies who can apply, the eligibility criteria, the timeline for application, and the consequences of delays or non-compliance. The section also details the procedure for provisional registration, renewal, and the conditions under which registration may be granted or rejected.

Key Changes:

1. Expanded Eligibility: The section now explicitly includes a broader range of entities, such as public trusts, societies, Section 8 companies, universities, and government-funded institutions, among others.
2. Provisional Registration: Introduces the concept of provisional registration for certain cases, allowing NPOs to operate temporarily while their full registration is processed.
3. Extended Validity: For smaller NPOs with income below ₹5 crore, the registration validity period is extended from 5 to 10 years.
4. Delay Condonation: Allows the Principal Commissioner or Commissioner to condone delays in application submission if there is a reasonable cause.
5. Accreted Income Tax: Introduces a penalty in the form of tax on accreted income for NPOs that fail to apply for registration within the specified time.

Practical Implications:

• For NPOs: Organizations must ensure timely application for registration to avoid penalties. Smaller NPOs with lower income can benefit from extended registration validity.
• For Tax Authorities: The section streamlines the registration process, allowing provisional registration and condoning delays, which reduces administrative burden.
• Compliance Burden: NPOs must maintain proper documentation and ensure compliance with other laws to avoid rejection of their application.

Critical Concepts:

• Charitable Purpose: Defined under Section 2(23) of the Income Tax Act, it includes relief of the poor, education, medical relief, and other activities beneficial to the public.
• Accreted Income: Refers to income that accumulates due to non-compliance with registration requirements, which may be taxed under Section 352.
• Provisional Registration: A temporary registration granted to certain NPOs, allowing them to operate while their full registration is processed.

Compliance Steps:

1. Determine Eligibility: Ensure the organization falls under one of the categories listed in Section 332(1).
2. Prepare Documentation: Gather necessary documents, including proof of registration, trust deeds, and financial statements.
3. Submit Application: File the application in the prescribed form and manner within the specified timeline.
4. Respond to Queries: Be prepared to provide additional documents or information if requested by the tax authorities.
5. Monitor Status: Track the application status and ensure compliance with any provisional registration conditions.

Examples:

• Example 1: A public trust focused on education applies for registration under Section 332. If its income in the last two years was below ₹5 crore, it may receive registration valid for 10 years instead of 5.
• Example 2: A society registered under the Societies Registration Act delays its application due to administrative issues. If the delay is condoned, it can still apply and receive registration without penalty.
• Example 3: An NPO fails to apply within the specified time and does not get the delay condoned. It may be liable to pay tax on its accreted income under Section 352.