What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

Charitable organizations are crucial in addressing numerous societal problems. To increase their efficiency, many NGOs seek registration under certain provisions of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will explore the advantages and procedures of registering under section 80g of income tax act and 12A, which are essential for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a crucial process for an NGO to gain recognition 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 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 increases 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 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 enables 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 important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to grant tax benefits to its donors.

The 80G deduction allows 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 permitted. However, the deduction rate may change depending on the category of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a great advantage for an ngo registration NGO as it enables them to bring in more donors. When donors realize they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances 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.
How to Get 80G Registration

To get 80G registration, an NGO must meet 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration requires the NGO to furnish 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 valid for five years.
Tax Savings Under 80G

Income Tax Act 80G lays down provisions through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Individuals, companies, and other entities making donations to an 80G registered NGO can claim a deduction under Section 80G.

The eligible 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 eligible for a 100% deduction.
Benefits of Both 12A and 80G

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 helps 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 follow 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 skilled 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 registered by executing a trust deed, which details 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 allows it to operate as a legal entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is crucial 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 motivated to contribute, knowing they can enjoy tax benefits, while 12A registration guarantees that the NGO’s income is tax-free.

If you are considering to start an NGO or are an current one looking to take advantage of these registrations, it’s recommended to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all criteria. These measures will not only enhance your NGO's credibility but also help in expanding your outreach and financial stability.