12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

Charitable organizations are crucial in solving numerous community challenges. To boost their effectiveness, many NGOs seek registration under certain provisions of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will examine the pros and process of registering under 80G registration and 12A registration, which are essential for NGOs wanting financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a crucial process for an NGO to gain recognition as a non-profit entity under Indian law. The registration enables the NGO to avail income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a prerequisite for obtaining grants and donations from various sources.

To register for 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or memorandum of association, PAN card, and details of activities.
What is Section 80G?



80G of the Income Tax Act allows donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section motivates individuals and corporations to contribute to charities, making it an important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction permits a portion of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is permitted. However, the deduction rate may change depending on the type of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a significant advantage for an 80g registration NGO as it helps them to attract more donors. When donors understand they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts its funding base, which is essential for achieving social goals.

Moreover, 80G registration is often necessary by funding agencies and potential donors who are looking for transparency and credibility in charitable organizations. As a result, NGOs with 80G certificates are more likely to obtain large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

To be eligible for 80G registration, an NGO must fulfill particular criteria:

Non-Profit Status: The NGO should not be engaged in any commercial activities, and its primary objective must be charitable.
Accountability for Funds: The funds should be used only for charitable purposes, and proper records must be maintained.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration requires the NGO to submit documents such as the legal document, 12A registration certificate, financial statements, and PAN card of the organization. The application is made to the Commissioner of Income Tax, and the registration is typically applicable for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G lays down provisions through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Individuals, companies, and other entities making donations to an 80G registered NGO can claim a deduction under Section 80G.

The eligible deduction is limited to a specific portion of the donation, generally either 50% or 100%, depending on the specific criteria set by the government. For instance, donations made to the Prime Minister's National Relief Fund are allowed a 100% deduction.
Importance of 12A and 80G Registration for 12a registration NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration allows an NGO claim exemptions on income, reducing their tax liability, while 80G registration helps donors to contribute by allowing them claim 80G deductions on their donations. These registrations boost the credibility of the NGO, allowing them to receive funds from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to handle the registration processes and follow tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services provide assistance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are skilled in handling the complexities of registrations and can ensure that the application is processed without hassle and in a timely manner.
Trust Registration for NGOs

For organizations that are looking to establish an NGO, trust registration is one of the most widely used ways to form a non-profit entity. In India, a charitable trust is typically set up by executing a trust deed, which details the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of receiving donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It forms the basis for the NGO’s activities and enables it to operate as a legal entity under the law.
Summary

Getting registered an NGO under Section 12A and Section 80G is important for any organization looking to get tax exemptions and increase donations. These registrations offer major advantages, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can get tax relief, while 12A registration makes sure that the NGO’s income is exempt from tax.

If you are planning to form an NGO or are an current one looking to benefit from these registrations, it’s advisable to get guidance from consultants in NGO consultancy to help you through the process and make sure compliance with all criteria. These steps will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.