Background and Rationale:

Under Section 12A of the Income Tax Act, 1961, charitable institutions and trusts seeking tax-exempt status must secure registration. In many instances, delays in registration or administrative hurdles have led to issues of non-compliance even when the institutions have valid reasons for the delay. Recognizing these challenges, the Finance Act (No. 2), 2024 has introduced provisions to streamline the remedial process.

Key Update: The Finance Act (No.2), 2024 announces that Form 10AB which is used for filing a condonation request under Section 12A can now be submitted via the e-filing portal. This change brings greater clarity, procedural efficiency, and transparency to the registration process.

Amendments and Their Implementation:

A proviso was inserted in clause (ac) of Section 12A(1) authorising the Principal Commissioner or Commissioner of Income-tax to condone delays in filing Form 10AB where sufficient cause is shown. Following this statutory amendment, the Income Tax Department activated the facility for filing condonation requests through Form 10AB on its e-filing portal from April 17, 2025.

Implications and Future Prospects:
This move will reduce the administrative burden on institutions and promote trust in tax governance. Entities must still ensure timely filings, but the risk of losing exemptions due to minor delays is now mitigated, subject to valid justification and departmental approval.

Conclusion:
The enablement of condonation requests via Form 10AB on the portal reflects a balanced approach maintaining compliance discipline while accommodating genuine cases. It also underlines the government’s intent to make the tax exemption framework more accessible and reasonable for charitable organisations.