12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

NGOs play a vital role in tackling various social issues. To enhance their impact, many NGOs get registered under designated parts of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will look into the pros and process of registering under Section 80G and 12A registration, which are key for NGOs aiming for financial support and credibility.
12A Registration Overview

12A certificate is a vital process for an NGO to gain recognition as a charitable organization under Indian law. The approval allows the NGO to avail income tax exemptions on their income. This means that the income received by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a requirement for gaining grants and donations from various sources.

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



80G of the Income Tax Act enables donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section encourages 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 permitted. However, the deduction rate may change depending on the category of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a great advantage for an 12a registration NGO as it allows them to attract more donors. When donors realize they can receive tax exemptions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and increases its funding base, which is essential 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 get large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

Charitable Objective: The NGO should not be involved 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.
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 applicable for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Income Tax Act 80G lays down provisions through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Persons, companies, and other entities contributing to an 80G registered NGO can receive tax deduction under Section 80G.

The tax deduction is limited to a part 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 80g deduction NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by letting them claim 80G deductions on their donations. These registrations increase 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 navigate the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services offer guidance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are knowledgeable in handling the complexities of registrations and can make sure that the application is processed smoothly and in a timely manner.
How to Register a Trust

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 registered with the registrar, making the organization an official entity capable of obtaining 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 allows it to operate as a recognized entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is essential for any organization aiming to receive 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 enjoy tax benefits, 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 get these registrations, it’s advisable to consult with experts in NGO consultancy to help you through the process and make sure compliance with all requirements. These steps will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.