Finance Minister Nirmala Sitharaman’s Budget for 2019-20 has elements of potentially the good, the bad, and the ugly for the voluntary sector in India. Let’s look at all three in reverse order.

The Ugly: Cancellation of registration for trusts or institutions

Section 12AA of the Income Tax Act 1961 prescribes the manner of granting registration to a trust or institution for the purpose of availing tax exemption on its income under section 11 of the Act. It also provides for the manner of cancellation of this registration; this can be on two grounds:

(i) the Principal Commissioner is satisfied that activities of the trust or institution are not genuine or are not being carried out in accordance with its objects; and

(ii) it is noticed that the activities are being carried out in a manner such that any part of income–or the whole income–would cease to be exempt.
 

(a) at the time of granting the registration to a trust or institution, the Principal Commissioner shall, inter alia, also satisfy himself about the compliance of the trust or institution to requirements of any other law which is material for the purpose of achieving its objects;

(b) where a trust or an institution has obtained registration at any time under section 12A and subsequently it is noticed that it has violated requirements of any other law which was material for the purpose of achieving its objects, the Principal Commissioner may, by an order in writing, cancel the registration of such trust or institution after affording a reasonable opportunity of being heard.

This amendment shall be effective from September 1, 2019.
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