What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

NGOs are crucial in solving various societal problems. To increase their efficiency, many NGOs get registered under certain provisions of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will explore the pros and procedures of getting registered under 80G registration and 12A, which are essential for NGOs seeking financial support and credibility.
12A Registration Overview

12A certificate is a crucial process for an NGO to be recognized as a charitable institution under Indian law. The process allows 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 boosts the credibility of an NGO and is often a prerequisite for gaining grants and donations from various sources.

To get 12A registration, the NGO must file 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 permits 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 key feature for NGOs seeking public funding. An NGO must obtain 80G registration to provide tax benefits to its donors.

The 80G deduction allows 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 permitted. However, the deduction rate may vary depending on the type of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an section 80g of income tax act NGO as it allows them to attract more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and boosts its funding base, which is critical for meeting 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.
Eligibility and Process for 80G Registration

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

Non-Profit Status: The NGO should not be involved in any commercial activities, and its primary objective must be charitable.
No Misuse of 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 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 valid for five years.
Tax Savings Under 80G

Income Tax Act 80G provides a framework through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. People, companies, and other entities making donations to an 80G registered NGO can claim a deduction 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 granted a 100% deduction.
Importance of 12A and 80G Registration for trust registration NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration allows 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 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 navigate the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services help with 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 guarantee that the application is processed effectively and in a timely manner.
How to Register a Trust

For organizations that are planning to start an NGO, trust registration is one of the most common 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 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 provides the foundation for the NGO’s activities and enables it to operate as a recognized entity under the law.
Conclusion

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

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