What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Charitable organizations play a vital role in tackling various societal problems. To increase their effectiveness, many NGOs get registered under designated parts of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will examine the advantages and process of registering under section 80g of income tax act and 12A, which are essential for NGOs seeking financial support and credibility.
Understanding 12A Registration

12A certificate is a crucial process for an NGO to be recognized as a non-profit entity under Indian law. The registration enables the NGO to avail 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 increases the credibility of an NGO and is often a prerequisite for receiving grants and donations from various sources.

To apply for 12A registration, the NGO must provide 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 the Income Tax Act permits donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section encourages 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 portion 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 differ depending on the nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an 80g registration NGO as it enables them to gain more donors. When donors know they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts its funding base, which is essential for achieving 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 be eligible for 80G registration, an NGO must fulfill particular criteria:

Charitable Objective: The NGO should not be conducting 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 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 valid for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Income Tax Act 80G lays down provisions through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Individuals, companies, and other entities contributing to an 80G registered NGO can get tax relief 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 granted a 100% deduction.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration enables an NGO avail exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by letting them claim 80G deductions on their donations. These registrations enhance the credibility of the NGO, allowing them to gain financial support 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 adhere to tax regulations, engaging an NGO consultancy can be highly helpful. 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 ensure that the application is processed without hassle and in a timely manner.
Trust Registration for NGOs

For organizations that are looking to establish an NGO, trust registration is one of the most widely used 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 obtaining donations and grants.

Trust registration is often the first step before applying for 12A and 80G registration. It forms the basis for the NGO’s activities and enables it to operate as a acknowledged entity under the law.
Final Thoughts

Registering an NGO under Section 12A and Section 80G is essential for any organization looking to get 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 more likely to contribute, knowing they can benefit from tax deductions, while 12A registration ensures that the NGO’s income is exempt from tax.

If you are looking to start an NGO or are an already established one looking to take advantage of these registrations, it’s suggested to consult with experts in NGO consultancy to help you through the process and guarantee compliance with all criteria. These steps will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.