12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

NGOs are important in tackling numerous community challenges. To boost their effectiveness, many NGOs get registered under certain provisions of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will look into 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 certificate is a vital process for an NGO to be recognized as a non-profit entity under Indian law. The process enables the NGO to benefit from income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn supports 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 receiving grants and donations from various sources.

To register for 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 organization memorandum, PAN card, and details of activities.
What is Section 80G?



80G of the Income Tax Act permits donors to claim deductions 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 provides for 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 granted. However, the deduction rate may change 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 12a NGO as it helps them to gain more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows its funding base, which is essential for fulfilling 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 receive large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

Non-commercial Nature: 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.
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 submit 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 effective for five years.
How Donors Benefit from Section 80G

Section 80G lays down provisions through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Persons, companies, and other entities donating 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 80g deduction NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration enables an NGO get 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.
Consultancy for NGOs

For NGOs looking to handle the registration processes and comply with 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 experienced in handling the complexities of registrations and can guarantee 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 receiving donations and grants.

Trust registration is often the first step before obtaining 12A and 80G registration. It provides the foundation for the NGO’s activities and permits it to operate as a recognized entity under the law.
Summary

Registering an NGO under Section 12A and Section 80G is important for any organization wanting 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 encouraged to contribute, knowing they can enjoy tax benefits, while 12A registration ensures that the NGO’s income is tax-free.

If you are considering to establish an NGO or are an current one looking to take advantage of 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 steps will not only increase your NGO's credibility but also help in expanding your outreach and financial stability.