What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Non-Governmental Organizations are crucial in addressing many community challenges. To enhance their efficiency, many NGOs get registered under specific sections of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will look into the advantages and process of registering under section 80g of income tax act and 12A, which are important for NGOs aiming for 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 charitable organization under Indian law. The process enables the NGO to benefit from income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn helps 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 obtaining 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 legal trust document or organization memorandum, PAN card, and details of activities.
What is Section 80G?



Section 80G of the Income Tax Act allows donors to claim deductions on their taxable income against donations made to eligible NGOs. This section motivates 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 provides for a portion 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 vary depending on the nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an 80g deduction NGO as it helps them to attract 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 grows its funding base, which is critical for meeting 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 qualify for 80G registration, an NGO must satisfy particular 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.
Formal Setup: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration requires the NGO to submit 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.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G lays down provisions through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. People, 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 granted a 100% deduction.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is useful for NGOs. 12A registration enables an NGO claim 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 enhance the credibility of the NGO, allowing them to receive funds from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to manage the registration processes and adhere to 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 knowledgeable in handling the complexities of registrations and can guarantee that the application is processed smoothly 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 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 submitted to the registrar, making the organization an official entity capable of gaining 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 permits it to operate as a recognized entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is essential for any organization wanting 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 more likely to contribute, knowing they can enjoy tax benefits, while 12A registration guarantees that the NGO’s income is not taxable.

If you are considering to form an NGO or are an already established one looking to take advantage of these registrations, it’s suggested to get guidance from consultants in NGO consultancy to assist you through the process and guarantee 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.