12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

Charitable organizations are crucial in solving many community challenges. To enhance their efficiency, many NGOs get registered under specific sections of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will look into the advantages and process of getting registered under Section 80G and 12A, which are key for NGOs wanting financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a vital process for an NGO to get acknowledged as a non-profit entity under Indian law. The registration allows the NGO to benefit from income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn enables the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a necessary step for obtaining grants and donations from various sources.

To get 12A registration, the NGO must provide an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust or memorandum of association, PAN card, and details of activities.
Section 80G Explained



Section 80G of the Income Tax Act enables donors to avail tax deductions 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 provide tax benefits to its donors.

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

Obtaining 80G registration is a great advantage for an section 80g of income tax act NGO as it enables them to gain 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 grows its funding base, which is crucial for achieving social goals.

Moreover, 80G registration is often required 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 receive large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

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

The application for 80G registration needs the NGO to furnish 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 effective for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G offers a system through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Persons, companies, and other entities donating to an 80G registered NGO can get tax relief under Section 80G.

The tax deduction is limited to a certain percentage 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.
Benefits of Both 12A and 80G

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

For NGOs looking to manage the registration processes and follow tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services help with 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 guarantee that the application is processed effectively and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are considering forming 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 defines the objectives and operational framework of the trust. This legal document is filed with the registrar, making the organization an official entity capable of receiving donations and grants.

Trust registration is often the first step before applying for 12A and 80G registration. It provides the foundation for the NGO’s activities and permits it to operate as a legal entity under the law.
Summary

Registering an NGO under Section 12A and Section 80G is crucial for any organization wanting tax exemptions and gain more supporters. These registrations provide substantial benefits, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can enjoy tax benefits, while 12A registration guarantees that the NGO’s income is tax-free.

If you are looking to establish an NGO or are an already established one looking to take advantage of these registrations, it’s recommended to seek advice from professionals in NGO consultancy to guide you through the process and guarantee compliance with all regulations. These measures will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.