What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

Charitable organizations play a vital role in addressing various community challenges. To enhance their efficiency, many NGOs seek registration under designated parts of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will explore the advantages and steps of getting registered under Section 80G and 12A, which are important for NGOs wanting financial support and credibility.
12A Registration Overview

12A registration is a crucial process for an NGO to gain recognition as a charitable organization under Indian law. The process permits 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 receiving grants and donations from various sources.

To apply for 12A registration, the NGO must provide 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.
Understanding 80G Registration



Section 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 key feature for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction provides for 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 change depending on the nature of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a great advantage for an 12a NGO as it allows them to bring in more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is crucial 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 fulfill certain criteria:

Non-commercial Nature: The NGO should not be engaged 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.
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 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.
How Donors Benefit from Section 80G

Section 80G of the Income Tax Act lays down provisions through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Individuals, companies, and other entities donating to an 80G registered NGO can receive tax deduction 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.
Benefits of Both 12A and 80G

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 helps donors to contribute by letting them claim 80G deductions on their donations. These registrations boost the credibility of the NGO, allowing them to receive funds from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
Consultancy for NGOs

For NGOs looking to manage the registration processes and follow tax regulations, engaging an NGO consultancy can be highly beneficial. 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 ensure that the application is processed effectively and in a timely manner.
How to Register a Trust

For organizations that are looking to establish an NGO, trust registration is one of the most popular 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 applying for 12A and 80G registration. It lays the groundwork for the NGO’s activities and enables it to operate as a legal entity under the law.
Conclusion

Becoming registered an NGO under Section 12A and Section 80G is essential for any organization wanting tax exemptions and increase donations. 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 guarantees that the NGO’s income is exempt from tax.

If you are planning to form an NGO or are an current one looking to benefit from these registrations, it’s recommended to seek advice from professionals in NGO consultancy to guide you through the process and guarantee compliance with all criteria. These measures will not only boost your NGO's credibility but also help in expanding your outreach and financial stability.