1. Introduction
The Finance Act (No. 2), 2024 brought in a significant relief for charitable and religious institutions under the Income-tax Act, 1961, by enabling condonation of delay in filing Form 10AB, which is crucial for re-registration or approval under Section 12A. This was much needed, given the mass migration to the new registration regime post-2020, and the inadvertent lapses that followed in timely compliance.
As of 17-April-2025, the Income Tax e-filing portal has enabled the online filing of the condonation request for Form 10AB under the newly inserted proviso to clause (ac) of Section 12A(1). This article elaborates on the legal background, implications, procedural aspects, and key considerations for charitable institutions and their advisors.
2. Legal Framework – Section 12A and Form 10AB
2.1 Background of Section 12A & 10AB
Section 12A is the gateway provision that lays down the conditions for an entity to be eligible for exemption under Sections 11 and 12. The Finance Act, 2020 overhauled the registration process of trusts, societies, and institutions by introducing a re-registration and approval mechanism, which mandated periodic renewal and verification.
- Form 10A was introduced for initial registration under the new regime.
- Form 10AB is to be filed subsequently for regular (permanent) registration, typically within 6 months before the expiry of the 5-year provisional registration granted earlier via Form 10A.
Failure to file Form 10AB within the prescribed time resulted in lapsing of registration, leading to denial of exemptions under Sections 11 and 12.
3. Insertion of Proviso to Clause (ac) of Section 12A(1) – Finance Act (No. 2), 2024
Recognising the hardships faced by genuine charitable institutions due to procedural lapses, the Finance Act (No. 2), 2024 inserted the following proviso to clause (ac) of Section 12A(1):
“Provided that where the person has made an application in accordance with the provisions of sub-clause (vi) or sub-clause (via) of clause (ac) of sub-section (1) of Section 12A and the application has not been filed within the time allowed under the said clause, the Commissioner may, after considering the reasons for delay, condone the delay, subject to such conditions as may be prescribed.”
Implication:
This enables the Principal Commissioner/Commissioner of Income Tax (Exemptions) to condone the delay in filing Form 10AB if sufficient cause is shown. The institution can continue to claim exemptions under Sections 11 and 12 upon grant of condonation.
4. Filing Condonation Request – Process Now Live on E-filing Portal
4.1 Eligibility
- Applicable to institutions that have:
- Filed Form 10A and received provisional registration.
- Failed to file Form 10AB within the stipulated deadline (typically 6 months before the expiry of 5-year validity).
- Reasonable cause must exist for the delay – e.g., technical glitches, COVID-related disruptions, lack of awareness, or professional lapses.
4.2 How to File
- Login to https://www.incometax.gov.in using the institution’s PAN credentials.
- Go to “e-File” > “Income Tax Forms” > “File Income Tax Forms”.
- Select Form 10AB (Condonation Request).
- Provide:
- Details of previous Form 10A filing.
- Grounds and explanation for delay (to be uploaded in a PDF or directly entered in text box).
- Supporting documents (e.g., board resolutions, correspondence, evidence of attempt).
- Submit with DSC or EVC.
- Acknowledgment is generated for future reference.
5. Key Scenarios and Strategic Guidance
5.1 Scenario A – Trust Missed Filing 10AB Despite Provisional Approval
Such institutions should immediately prepare and file condonation request with a proper explanation. Once condoned, they can continue to enjoy exemptions without any break.
5.2 Scenario B – Assessment Initiated or Scrutiny Triggered
If the institution is undergoing scrutiny for any AY and its exemption claim is denied due to non-filing of 10AB, filing the condonation request and securing approval can help revive the exemption claim, subject to appellate or rectification remedies.
5.3 Scenario C – Late Discovery of Missed Filing
Where an institution recently discovered that 10AB was not filed and the due date lapsed in prior year(s), they should not panic but promptly invoke this condonation provision.
6. Legal and Compliance Considerations
- The Commissioner must record satisfaction regarding “sufficient cause”.
- There is no fixed timeline for acceptance of condonation; however, undue delay must be avoided.
- This relief does not extend to Form 10A, which continues to be a hard deadline-based filing.
- This does not absolve other compliance obligations such as filing Audit Reports (Form 10B/10BB) or Annual Statements (Form 10BD/10BE).
7. Professional Advice and Documentation Tips
- Ensure a reasoned and well-documented explanation for the delay – vague or casual submissions may lead to rejection.
- Attach supporting evidences – correspondence with earlier consultants, screenshots, or board minutes showing attempts or intention.
- Use standard legal templates for condonation request with references to the new proviso.
- Maintain a compliance calendar to track all due dates related to tax-exempt institutions to avoid such lapses in the future.
8. Conclusion
The introduction of the condonation facility for Form 10AB is a commendable and empathetic step by the government to safeguard the interests of genuine charitable entities. This move not only aligns with the principles of natural justice but also reflects the administration’s willingness to support the nonprofit ecosystem of India.
Charitable institutions and their advisors must act swiftly to avail this relief and ensure their exempt status remains uninterrupted. This opportunity is a second chance – and must be approached with diligence and proper professional care.
Appendix: Reference Provisions
- Section 12A(1)(ac)(vi)/(via) of the Income Tax Act, 1961
- Proviso inserted by Finance Act (No. 2), 2024 – applicable w.e.f. 1 April 2024
- Income Tax Rules, 1962 – likely to be amended to include procedural aspects
- CBDT Circulars/Portal Instructions (as and when issued)
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