Taxation of unregistered Charitable Institute

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Ravi Rawat (Querist)
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19 May 2009 What will be the tax treatment for an unregistered Charitable Society under Income Tax (neither registered under Societies registation act nor under Sec 12A of Income Tax Act) ?

Which ITR form shall be filled ITR 5 or 7?

Whether the Life membership fee collected from its members is liable to tax?

In the next year the Society get registration under Societies Registration Act but not under Income Tax.

How it will be dealt with in both the years??

Ravi Rawat

Ravi Rawat (Querist)
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21 May 2009 Is there some expert who can reply my query please...

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 ### 📌 Taxation of Unregistered Charitable Institution (Neither under Societies Registration Act nor u/s 12A of the Income Tax Act)

#### ✅ **1. Legal Status and Income Tax Treatment**

If a charitable society/institution is **not registered under Section 12A/12AA** of the Income-tax Act, it **cannot claim exemption under Sections 11 and 12**. Hence:

* It will be **treated as an Association of Persons (AOP)**.
* It will be taxed **as per the normal provisions** of the Income Tax Act.
* **Income tax will be applicable on net income** after claiming permissible business and administrative expenses under normal provisions (not Section 11).

#### ✅ **2. Taxability of Income Including Membership Fees**

* **Life Membership Fees**: If collected and **not refundable**, it is **treated as income**.
* If the membership fee is **capital in nature (with evidence it’s earmarked for a corpus or capital purposes)**, then it might not be taxed — **but only if the institution is registered u/s 12A**, which is not the case here.
* Therefore, in this unregistered case, **life membership fees are taxable income**.

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### 📄 ITR Form to be Filed

| Situation | Applicable ITR |
| ----------------------------- | --------------------- |
| Not registered under Sec. 12A | **ITR-5** (as an AOP) |
| Registered under Sec. 12A | **ITR-7** |

Since your institution is **not registered u/s 12A**, **ITR-5** is the correct form to file.

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### 📆 Year-wise Treatment

#### 📍 **Year 1: Not registered under Societies Act or Income Tax Act**

* Treated as **AOP**.
* **All receipts including life membership fees are taxable**, after deducting eligible expenses.
* **No exemption** under Sec. 11 or 12.

#### 📍 **Year 2: Registered under Societies Registration Act but still not u/s 12A**

* Merely registering under Societies Registration Act **does not grant tax exemption**.
* Still treated as AOP.
* Continue filing **ITR-5**.
* Taxed on **net income** (receipts minus expenses).
* If applying for Sec. 12A registration, benefits under Sections 11/12 **will only apply prospectively** from the **assessment year following the year of registration** (subject to certain exceptions per amendments made by Finance Act 2023).

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### ✅ Summary

| Criteria | Status/Action |
| ----------------------- | ------------------------------------------ |
| Exempt u/s 11 & 12? | ❌ Not unless registered under Sec. 12A |
| Life Membership Fee | ✅ Taxable if not part of registered corpus |
| ITR to File | **ITR-5** |
| Taxable Status | Taxable as **AOP** |
| Future 12A Registration | Exemption available only **prospectively** |

Let me know if you need help with sample computation or steps to register under Sec. 12AB (new 12A registration).

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