12A Registration Overview

12A Registration Overview

Blog Article

Understanding 12A Registration

Non-Governmental Organizations are crucial in tackling many community challenges. To increase their effectiveness, many NGOs apply for registration under specific sections of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will explore the pros and process of registering under Section 80G and 12A, which are important for NGOs wanting financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a vital process for an NGO to gain recognition as a charitable institution under Indian law. The approval enables the NGO to obtain 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 obtaining 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 trust deed or memorandum of association, PAN card, and details of activities.
Section 80G Explained



80G of Income Tax Act of the Income Tax Act allows donors to claim deductions 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 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 allowed. However, the deduction rate may vary depending on the category of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an ngo consultancy NGO as it enables them to gain more donors. When donors understand they can receive tax exemptions 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 meeting 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 obtain large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

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

Charitable Objective: The NGO should not be engaged 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.
Legal Status: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration needs the NGO to submit 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.
Tax Savings Under 80G

Section 80G of the Income Tax Act offers a system 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 specific portion 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 beneficial for NGOs. 12A registration allows an NGO avail exemptions on income, reducing their tax liability, while 80G registration helps donors to contribute by allowing 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.
NGO Consultancy Services

For NGOs looking to handle the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services provide assistance 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 make sure 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 popular ways to form a non-profit entity. In India, a charitable trust is typically set up 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 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 acknowledged entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive tax exemptions and increase donations. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged to contribute, knowing they can get tax relief, while 12A registration makes sure that the NGO’s income is not taxable.

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