What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

Charitable organizations play a vital role in tackling numerous community challenges. To enhance their efficiency, many NGOs get registered under certain provisions of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will examine the benefits and procedures of getting registered under section 80g of income tax act and 12A, which are important for NGOs wanting financial support and credibility.
12A Registration Overview

12A registration is a important process for an NGO to be recognized as a non-profit entity under Indian law. The approval enables the NGO to obtain income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn supports 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 receiving grants and donations from various sources.

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



80G of the Income Tax Act permits donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section encourages 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 allowed. However, the deduction rate may differ depending on the nature of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a major advantage for an 80g registration NGO as it allows them to bring in more donors. When donors understand they can get tax benefits on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts its funding base, which is critical 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 get large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

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

Charitable Objective: The NGO should not be conducting 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.
Legal Status: 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 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.
Tax Savings Under 80G

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

The deduction amount 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 eligible for a 100% deduction.
Importance of 12A and 80G Registration for 80g registration NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration helps an NGO claim exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by allowing 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.
How NGO Consultancy Can Help

For NGOs looking to handle the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services provide assistance 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 without hassle and in a timely manner.
Trust Registration for NGOs

For organizations that are planning to start an NGO, trust registration is one of the most popular ways to form a non-profit entity. In India, a charitable trust is typically formed by executing a trust deed, which outlines 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 obtaining 12A and 80G registration. It forms the basis for the NGO’s activities and allows it to operate as a legal entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is important for any organization looking to get 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 more likely to contribute, knowing they can benefit from tax deductions, while 12A registration ensures that the NGO’s income is tax-free.

If you are planning to form an NGO or are an already established one looking to get these registrations, it’s advisable 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 enhance your NGO's credibility but also help in expanding your outreach and financial stability.