Two-tier registration process: provisional (3 years) then regular (5/10 years).
Step 1: Provisional
Form 104 - 3 years validity
Old: Form 10A. Requirements: Deed, no-objection, proposed activities, expected income.
Step 2: Regular
Form 105 - 5 or 10 years validity
Old: Form 10AB. Requirements: Tax return filed for 2 years, 85% application proven, audit clearance.
Processing: Assessing Officer issues Form 106 (provisional) or Form 107 (regular) order within 30 days.
| Date |
Deadline Item |
| 31 May |
Form 113/114 - Donation statement filing |
| Before 31 Oct |
Form 112 - Audit report (if required) |
| 31 October |
Form 135 - Return of income (with Form 112) |
| 5-6 years before expiry |
Form 105 - Registration renewal application |
Filing Order: Form 113/114 → Form 112 → Form 135. Do not reverse this sequence.
- 85% Application: Spend 85% of income annually on charitable activities (Sec 336)
- Annual Audit: Form 112 required if income >threshold or specified activity engaged (Sec 354)
- Separate Books: Maintain distinct books for charitable vs. commercial activities
- Permitted Investments: Invest per Schedule XV (corpus/accumulation) or Schedule XVI (general)
- No Benefits to Related: Strict penalty (100-200%) if benefits given to related persons (Sec 445)
- Accumulation Limits: Max 5 years accumulation; set aside must match specific rules (Sec 342)
- Transfer Pricing: Document all transactions with specified domestic entities (Sec 171-172)
Trust must apply 85% of income received in India annually for charitable purposes to maintain exemption.
Allowed Applications
- Sums donated to registered charity in India
- Direct charitable/religious activity
- 85% of corpus donated to other registered NPO
NOT Allowed
- Depreciation on same asset (double claim)
- Set-off from prior years' excess
- Corpus donation without actual spending
Shortfall: If 85% not met, tax imposed on shortfall amount + interest (Sec 352).
Accumulated income and corpus must be invested in approved modes only.
| Investment Type |
Corpus |
Accumulation |
| Government securities |
✓ |
✓ |
| Fixed deposits (banks) |
✓ |
✓ |
| Mutual funds |
✓ |
✓ |
| Real estate (specified) |
✓ |
Limited |
| Charity activities (spend) |
Limited |
✓ |
Key: Corpus invested in Schedule XV modes. Accumulated income per Schedule XVI (broader list).
| Violation |
Penalty |
Reference |
| Benefits to related persons |
100% or 200% of amount |
Sec 445 |
| Non-renewal of registration |
Tax on assets fair market value |
Sec 352 |
| 85% application shortfall |
Tax on shortfall + interest |
Sec 352 |
| Non-filing of return |
Rs 5,000 (late fee) |
Sec 428 |
| No audit when required |
0.5% of receipts or Rs 1,50,000 |
Sec 446 |
Important: Related person penalty is stringent. Proper due diligence essential.
Trusts may accumulate income for future charitable activities, but only within prescribed limits and timeline.
- Duration: Max 5 years accumulation of income (can be extended)
- Set-Aside: Must create distinct corpus/sinking fund for accumulated income
- Investment: Accumulated funds per Schedule XVI (broad list available)
- Carry Forward: Set-aside cannot be carried forward beyond 5 years without fresh direction
- Specified Income: Income from commercial activities taxed separately at 30% (cannot be accumulated)
- Prior Approval: Assessing Officer may approve longer accumulation on application (Sec 342(3))
- Form 10A → Form 104: Provisional registration form
- Form 10AB → Form 105: Regular registration form
- Form 10B → Form 112: Audit report for non-profits
- Form 10BD → Form 113/114: Donation statement (split into trust/institution)
- ITR-7 → Form 135: Return of income for non-profits
- New Section 333-347: Consolidated trust exemption provisions
- New Schedule XV: Permitted corpus investment modes
- New Schedule XVI: General permitted investment modes for accumulated income
- Stricter Related Person Rules: Penalties 100-200% (vs 50% before)
Rules Mapper →
| Income Type |
Tax Rate |
Taxability |
| Regular income applied (85%) |
0% |
Exempt |
| Interest on deposits |
30% |
Taxed |
| Dividend income |
30% |
Taxed |
| Capital gains (long-term) |
20% |
Taxed |
| Commercial activity profit |
30% |
Taxed (specified income) |
| Excess over 85% threshold |
30% |
Taxed |
Computation: Taxable income = total income - 85% of applicable receipts (or set amount). Commercial profit taxed separately.
- Verify 85% of income applied on charitable activities in India
- Reconcile donation receipts with donors' 80G claims (Form 113/114)
- Check accumulation doesn't exceed 5-year limit without renewal
- Confirm all investments per Schedules XV or XVI (not otherwise)
- Verify no benefits paid to related persons (declare if any)
- Review commercial activity revenue (separate books maintained)
- Check transfer pricing documentation (if domestic transactions)
- Ensure registration renewal filed 6+ months before expiry
- Validate depreciation calculations (85% rule doesn't allow double benefit)
- Prepare audit report (Form 112) if required
⚠ Risk Area: Benefits to family members (related persons) attract highest penalties. Maintain complete documentation.