Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

Charitable organizations play a vital role in solving various community challenges. To boost their effectiveness, many NGOs get registered under certain provisions of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will examine the benefits and steps of registering under section 80g of income tax act and 12A, which are essential for NGOs seeking financial support and credibility.
12A Registration Overview

12A registration is a vital process for an NGO to gain recognition as a charitable organization under Indian law. The registration permits the NGO to obtain income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn enables the organization in utilizing more resources for charitable activities. Obtaining 12A registration also enhances the credibility of an NGO and is often a requirement for obtaining grants and donations from various sources.

To apply for 12A registration, the NGO must file an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust 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 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 essential tool for NGOs seeking public funding. An NGO must obtain 80G registration to provide tax benefits to its donors.

The 80G deduction allows 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 type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a major advantage for an section 80g NGO as it allows them to bring in more donors. When donors understand they can get tax benefits on their donations, they are more likely to contribute. This also improves the NGO’s reputation and boosts 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 get large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

To be eligible for 80G registration, an NGO must satisfy certain criteria:

Charitable Objective: 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 effective for five years.
How Donors Benefit from Section 80G

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

The tax deduction is limited to a part 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 allowed a 100% deduction.
Importance of 12A and 80G Registration for trust registration NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by letting them claim 80G deductions on their donations. These registrations enhance 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 advantageous. NGO consultancy services offer guidance 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 smoothly and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are looking to establish an NGO, trust registration is one of the most common 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 registered 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 allows it to operate as a legal entity under the law.
Final Thoughts

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization looking to get tax exemptions and gain more supporters. These registrations offer major advantages, 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 get tax relief, while 12A registration guarantees that the NGO’s income is exempt from tax.

If you are looking to form an NGO or are an existing one looking to get these registrations, it’s advisable to seek advice from professionals in NGO consultancy to help you through the process and ensure compliance with all regulations. These actions will not only increase your NGO's credibility but also help in expanding your outreach and financial stability.