12A Registration Overview

12A Registration Overview

Blog Article

Understanding 12A Registration

Non-Governmental Organizations play a vital role in solving numerous social issues. To increase their effectiveness, many NGOs seek registration under specific sections of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will explore the advantages and steps of getting registered under Section 80G and 12A, which are key for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a important process for an NGO to be recognized as a charitable institution under Indian law. The registration allows the NGO to avail 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 necessary step for gaining grants and donations from various sources.

To register for 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust or organization memorandum, PAN card, and details of activities.
Section 80G Explained



Section 80G of the Income Tax Act allows donors to claim 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 grant tax benefits to its donors.

The 80G deduction allows a percentage of the donation to be deducted 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 nature of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an 80g NGO as it helps them to attract more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also improves the NGO’s reputation and increases its funding base, which is crucial for fulfilling 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 receive large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

To get 80G registration, an NGO must meet particular criteria:

Non-commercial Nature: The NGO should not be involved 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.
Registration: 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 offers a system 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 making donations to an 80G registered NGO can get tax relief under Section 80G.

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

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables an NGO get exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by allowing them claim 80G deductions on their donations. These registrations increase the credibility of the NGO, allowing them to gain financial support from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to navigate the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly advantageous. 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 smoothly and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are considering forming 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 registered with the registrar, making the organization an official entity capable of receiving donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It lays the groundwork for the NGO’s activities and permits it to operate as a acknowledged entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is essential for any organization aiming to receive tax exemptions and attract more donors. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can benefit from tax deductions, while 12A registration makes sure that the NGO’s income is exempt from tax.

If you are considering to establish 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.