Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

Non-Governmental Organizations play a vital role in tackling various community challenges. To enhance their impact, many NGOs seek registration under certain provisions of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will examine the benefits and steps of getting registered under Section 80G and 12A, which are essential for NGOs aiming for financial support and credibility.
12A Registration Overview

12A certificate is a crucial process for an NGO to gain recognition as a charitable institution under Indian law. The process permits 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 enables the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases 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 provide an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or memorandum of association, PAN card, and details of activities.
What is Section 80G?



80G of Income Tax Act of the Income Tax Act enables donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section motivates individuals and corporations to contribute to charities, making it an essential tool for NGOs seeking public funding. An NGO must obtain 80G registration to grant tax benefits to its donors.

The 80G deduction permits a fraction of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is granted. However, the deduction rate may differ depending on the category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an 12a NGO as it enables them to attract more donors. When donors realize 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 essential for meeting social goals.

Moreover, 80G registration is often required 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 qualify for 80G registration, an NGO must fulfill certain criteria:

Non-Profit Status: 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 get deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Persons, 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 eligible for a 100% deduction.
Importance of 12A and 80G Registration for 12a NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration helps 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 increase the credibility of the NGO, allowing them to receive funds 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 comply with 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 ensure that the application is processed smoothly and in a timely manner.
How to Register a Trust

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 set up by executing a trust deed, which outlines 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 recognized entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is important 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 get tax relief, while 12A registration ensures that the NGO’s income is tax-free.

If you are looking to form an NGO or are an already established one looking to take advantage of these registrations, it’s advisable to consult with experts in NGO consultancy to guide you through the process and ensure compliance with all requirements. These measures will not only enhance your NGO's credibility but also help in expanding your outreach and financial stability.