Donations received by charitable and religious trusts are exempt from taxation, provided they comply with certain prescribed conditions. The taxation of such trusts is primarily governed by Section 11 of the Income Tax Act, which lays down the framework for exemption. Only entities established for charitable or religious purposes can avail themselves of this benefit, and even though their income is exempt, they are still required to file income tax returns annually.
To strengthen the sector, the Finance Act, 2025 introduced a proposal to extend the validity of registrations under Section 12A/12AB from five years to ten years. However, this benefit is restricted to trusts whose income does not exceed ₹5 crore in each of the two immediately preceding financial years. While the legislative intent is clear, the compliance process remains uncertain, raising concerns for lakhs of trusts across the country.
Extension not automatic
According to tax expert CA Himank Singla, the Finance Act’s amendment is significant, but it does not guarantee an automatic 10-year extension. “As of now, there is no official notification confirming that the longer validity will apply without any action from trusts. In fact, recent guidance specifies that all trusts with registrations valid up to AY 2026–27 must apply for renewal by 30 September 2025. Failure to do so may lead to exemption benefits lapsing after 31 March 2026. Importantly, the 10-year validity applies only after successful renewal, not by default,” he explained.
Conditional relief
Adding to this perspective, CA (Dr.) Suresh Surana noted that the Finance Act, 2025 makes the extended validity conditional. “Only trusts whose income remains below ₹5 crore in each of the two preceding financial years will qualify. Even then, the relief is not automatic. The law clearly states that the longer validity applies ‘where an application is made’ under the specified provisions. Filing a renewal application is therefore a mandatory prerequisite,” Surana said.
This clarification is critical because many organizations mistakenly believe they need not act if their income qualifies. Experts stress that filing for renewal on time is the only way to ensure uninterrupted tax benefits.
Renewal deadline looms
CBDT guidance through FAQs and circulars has confirmed that the 30 September 2025 deadline applies to all trusts with registrations valid up to AY 2026–27, regardless of income level. Registrations granted under Section 12AB in 2021–22 are valid for five years and will expire on 31 March 2026. To comply with Section 12A(1)(ac), which requires filing at least six months before expiry, renewal applications must be submitted before the September deadline.
If a trust fails to renew, it risks losing exemption under Sections 11 and 12, donor deduction benefits under Section 80G, and could face severe disruption in funding and charitable activities.
“For charitable organisations, any gap in compliance could mean loss of tax-exempt status under Sections 11 & 12. Ineligibility for donor deductions under Section 80G (if registered). Disruption in funding and activities. Hence, prompt clarification is essential so trusts know whether to file renewal applications by 30 September 2025, or rely on the Finance Act’s automatic extension,” Surana added.
Implications of non-compliance
For charitable organisations, missing the renewal deadline could prove costly.
Loss of tax-exempt status under Sections 11 and 12.
Ineligibility for donor deductions under Section 80G, affecting fundraising efforts.
Operational disruptions, as the loss of exemption would make donations and income taxable, limiting resources available for charitable activities.
Experts argue that the stakes are too high for trusts to assume that the Finance Act’s amendment offers an automatic safeguard. Until CBDT issues a clear notification, filing renewal applications remains the safest course of action.
GCCI’s appeal for relief
The Gujarat Chamber of Commerce and Industry (GCCI) has taken up this issue with the Central Government, urging it to harmonise compliance requirements for existing and new trusts. The GCCI has proposed granting a 10-year registration validity to all charitable trusts that migrated under Section 12A in 2021.
Gujarat alone has nearly 3 lakh charitable trusts, with about 90% earning less than ₹5 crore annually. Most of these trusts switched to Section 12AB in 2021 and were issued certificates valid until 31 March 2026. Consequently, they now fall under the requirement to renew by 30 September 2025. The GCCI argues that this creates unnecessary compliance burdens and potential taxation risks for small charitable entities that already qualify for the proposed 10-year tenure.
By seeking parity with newly registered trusts, GCCI aims to reduce administrative hurdles and provide stability to organisations working on critical social missions. Its appeal highlights the importance of simplifying regulatory processes for the non-profit sector, ensuring that charitable organisations can focus on service delivery rather than procedural uncertainties.
What’s next
As the renewal deadline approaches, the charitable sector is looking to the CBDT for clarity. A formal circular confirming whether the 10-year validity will apply automatically, or only after renewal, would remove ambiguity. Until then, experts unanimously advise that trusts file their renewal applications by 30 September 2025 to safeguard exemptions beyond March 2026.
