TaxSaral
Section 332Charitable Trusts & NPOswas Sections 12A, 12AB, 80G in IT Act 1961

Registration of Charitable Trusts and NPOs

All charitable trusts, religious institutions, educational societies, hospitals, and non-profit bodies must register under Section 332 to claim income tax exemption. Without registration, the trust's entire income is taxable at the Maximum Marginal Rate (MMR). New trusts get provisional registration valid for 3 years; thereafter, regular 5-year registration must be obtained.

Who this applies to

All charitable trusts, religious organisations, educational institutions, hospitals, and non-profit bodies seeking income tax exemption under IT Act 2025.

Key Points

  • New trusts: apply for provisional registration (Form 10A) BEFORE starting activities — valid for 3 years
  • After 3 years: apply for regular registration (Form 10AB) — valid for 5 years, renewable
  • Existing 12A/12AB registered trusts must re-register every 5 years under the new scheme
  • Without registration: entire income taxable at MMR (~30% + surcharge + cess)
  • 80G approval (for donors to get deduction) is a separate application but usually filed alongside
  • Application is filed online on the Income Tax e-filing portal; approval typically within 1–3 months

Worked Example

1

New Trust — Impact of Registration vs. No Registration

Scenario

Seva Foundation (newly formed, runs free medical camps) earns ₹80 lakh in donations and interest in TY 2026-27. It applied for and received provisional registration before starting activities.

Calculation

WITH Registration (Section 332):
  Income:                              ₹80,00,000
  Applied to medical activities (87%): ₹69,60,000  → Exempt
  Accumulated (13%, with filing):      ₹10,40,000  → Exempt
  Tax liability:                       ₹         0

WITHOUT Registration:
  Total income:                        ₹80,00,000
  Tax at MMR (30% + surcharge + cess): ₹25,04,000
  ──────────────────────────────────────────────
  Tax saved by registering:            ₹25,04,000

Result

Registration saves over ₹25 lakh in tax. Any trust or NPO should file for registration as its very first compliance action — even before receiving its first donation.

Related Sections

Section 341Application of Income — The 85% Charitable Spending Rule
Section 335Regular Income of Registered NPO — The Exemption Provision
Section 35480G Approval — Enabling Tax Deduction for Donors
Section 348Audit of Accounts — Mandatory for NPOs above ₹2.5 Lakh
Section 349Filing Income Tax Return for Charitable Organisations

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.