Trust not registered u/s 12a for past 16years

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2018 THE TRUST HAS FORMED IN THE YEAR 2002 AND THERE IS NO CHARITY ACTIVITY DONE TILL DATE. AMOUNT OF Rs 10,00,000/- WAS DEPOSITED IN BANK IN THE YEAR 2002 FOR THE CURRENT YEAR THE AMOUNT WAS NEARLY 15,00,000/- IN 2017 MARCH, NOT EVEN A SINGLE RUPEE WAS SPENT TILL DATE FOR CHARITY.SHOULD THE TRUST GET REGISTERED NOW UNDER 12A OF INCOME TAX ?? WHAT ARE THE CONSEQUENCES.
WE WANT TO SPEND THE AMOUNT NOW

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 January 2018 No consequences register under 12a and start charitable activities.

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Querist : Anonymous

Querist : Anonymous (Querist)

19 January 2018 sir shall we pay tax for that 10,00,000/- which was deposited in bank 16 years ago, TDS got deducted for that amount @ 20% and now the amount was nearly 15,00,000 in the Bank a/c

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 January 2018 No tax payable as yearly taxes will be below taxable limit.

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Querist : Anonymous

Querist : Anonymous (Querist)

19 January 2018 Sir ,
But the total income of AOP/BOI is taxable at rates appilcable to individual or at maximum marginal rates or at higher than maxium margin rates when it is not registered under 12A

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 You're asking a very important question about a **charitable trust** that:

* Was formed in **2002**
* Has **not been registered under Section 12A** of the Income Tax Act
* Has **not conducted any charitable activities**
* Has only **kept funds (₹10 lakhs in 2002)** in the bank, which grew to about **₹15 lakhs by 2017**
* Now wants to register and start charitable work

Let’s break this down clearly.

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## ✅ 1. **Should You Register Now Under Section 12A?**

**Yes.**
If you want to **claim income tax exemption on future income**, you **must get registered** under:

* **Section 12A/12AB** – For charitable purpose exemption
* Possibly **80G** – If you want donors to claim deduction

Without registration, all income (including interest earned on bank deposits) is **taxable** at slab rates applicable to AOPs.

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## ❓2. **Do You Need to Pay Tax on Past Income?**

This part is important.

Since the trust was **not registered** under 12A **for the past 16 years**, it **cannot claim exemption** for those years.

### What’s Taxable?

* The **interest earned** on bank deposits each year is considered **income**.
* If you **did not file returns** or declare this interest, technically the **trust is in default** for those years.

BUT…

* Since **TDS was deducted** @20%, that tax might **cover the liability**, **provided** you can explain the source and have TDS certificates.
* You should **consult a CA** to assess whether the trust needs to **file past ITRs**, pay additional tax, or whether it’s better to **disclose and regularize** the position now (possibly under updated schemes like the *ITD-Vivad se Vishwas* or similar, if available).

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## 📌 3. **What Happens Now if You Start Charity Activities?**

If you:

1. **Apply for registration under 12AB** (the new version of 12A/12AA), and
2. **Start actual charitable activities** (education, health, relief, etc.)

Then from the **date of registration**, your trust’s **future income** (including donations, interest, etc.) can be **exempt under Section 11**—**if 85% is applied for charitable purposes annually.**

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## ⚠️ Key Points:

* Past income (before 12A registration) is **taxable**.
* Interest income for 15 years should ideally have been reported. Since TDS was deducted, you might **not owe much additional tax**—but it needs review.
* **Principal (₹10 lakhs)** is likely **not taxable** if it was a capital contribution or donation—but again, depends on documentation.
* Start proper **books of accounts, auditing, and activity reporting** going forward.

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Would you like a **draft roadmap** for getting 12AB registration and starting compliance correctly from now on?

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