12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

NGOs are crucial in addressing various social issues. To boost their efficiency, many NGOs get registered under certain provisions of the Income Tax Act to obtain tax benefits and incentives for contributors. In this article, we will explore the pros and procedures of registering under section 80g of income tax act and 12A, which are essential for NGOs aiming for financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a important process for an NGO to be recognized as a charitable institution under Indian law. The approval allows the NGO to avail 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 enhances the credibility of an NGO and is often a prerequisite for gaining grants and donations from various sources.

To apply for 12A registration, the NGO must file an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or organization memorandum, 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 promotes individuals and corporations to contribute to charities, making it an essential tool for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction permits a percentage of the donation to be written off from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is granted. However, the deduction rate may differ 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 NGO as it allows them to bring in more donors. When donors know they can receive tax exemptions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and increases its funding base, which is critical for achieving social goals.

Moreover, 80G registration is often demanded 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.
80G Registration Requirements

To get 80G registration, an NGO must satisfy specific criteria:

Charitable Objective: The NGO should not be conducting 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration involves the NGO to provide documents such as the trust deed, 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.
How Donors Benefit from Section 80G

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

The deduction amount 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 eligible for a 100% deduction.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps an NGO claim exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by letting them claim 80G deductions on their donations. These registrations increase the credibility of the NGO, allowing them to attract funding 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 offer guidance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are experienced in handling the complexities of registrations and can ensure that the application is processed smoothly 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 registered 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 obtaining donations and grants.

Trust registration is often the first step before obtaining 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

Registering an NGO under Section 12A and Section 80G is important for any organization looking to get tax exemptions and increase donations. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are more likely to contribute, knowing they can get tax relief, while 12A registration ensures that the NGO’s income is not taxable.

If you are looking to establish an NGO or are an existing one looking to take advantage of these registrations, it’s recommended to get guidance from consultants in NGO consultancy to guide you through the process and guarantee compliance with all requirements. These steps will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.