In a welcome move for the nonprofit sector, the Union Budget 2025 has proposed a significant amendment to the Income Tax Act, providing 10-year registration validity for small charitable trusts and institutions. This change aims to ease the compliance burden on organizations with limited annual income and simplify the renewal process under Section 12AB of the Act.
What’s the Current Scenario?
Currently, all charitable and religious institutions registered under Section 12AB are required to renew their registration every 5 years, irrespective of their size or income. This frequent renewal process adds to the administrative load, especially for smaller organizations.
Furthermore, newly established trusts receive provisional registration for 3 years, and are required to reapply for permanent registration once they commence operations.
What’s Changing in Budget 2025?
As per the Finance Bill, 2025, the government has proposed that trusts and institutions whose total income does not exceed ₹5 crore (before claiming exemptions under Sections 11 and 12) in the preceding two financial years will now be eligible for 10-year registration under Section 12AB.
Who Will Benefit?
- Trusts applying under clauses (i) to (v) of Section 12A (1)(ac)
- Those whose gross income is less than ₹5 crore (before claiming any tax exemption)
- Organizations with a consistent history of compliance and operations
Who Will Not Benefit?
- Newly formed trusts applying under clause (vi) of Section 12A (1)(ac) (i.e., after commencing activities)
- Trusts whose income exceeds ₹5 crore in any of the two prior financial years
Note: The new provision is not applicable to trusts applying for registration after starting their operations (which includes smallest NGOs and institutions).
Effective Date
This amendment will come into force from April 1, 2025 and will apply to applications made on or after that date.
All such Trusts which got themselves registered in 2021 i.e. from AY 2022-23 to AY 2026-27 are hence registered upto 31.03.2026 and need to apply for Renewal of Registration in Form 10AB latest by 30.09.2025 to claim exemption for further 5 / 10 years.
However, the language of the law leaves room for interpretation about whether it will apply based on application date or approval date — a clarification from CBDT may be expected.
80G Approval Remains Unchanged
It’s important to note that the 5-year renewal requirement for Section 80G (which allows donors to claim tax deductions) remains unchanged. So even if a trust receives 10-year registration under Section 12AB, they will still need to renew their 80G certificate every 5 years.
Expert Take
This move will undoubtedly reduce paperwork and compliance pressure for small charitable institutions. However, the majority of small trusts—especially those applying post-commencement of activities—may not be eligible for the 10-year registration.
Professionals advise that eligible trusts plan their registration process strategically to make the most of this benefit.
Final Words
The 10-year registration proposal for small charitable trusts is a positive and strategic step in tax administration reform. While its scope may be limited in its current form, it paves the way for simpler compliance and greater operational stability for genuine not-for-profit institutions in India