What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Non-Governmental Organizations are crucial in tackling many societal problems. To enhance their effectiveness, many NGOs get registered under specific sections of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will explore the pros and process of getting registered under 80G registration and 12A, which are key for NGOs aiming for financial support and credibility.
12A Registration Overview

12A certificate is a important process for an NGO to gain recognition as a non-profit entity under Indian law. The approval 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 helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also enhances the credibility of an NGO and is often a necessary step for gaining grants and donations from various sources.

To apply 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 MOA, PAN card, and details of activities.
What is Section 80G?



80G of Income Tax Act of the Income Tax Act enables 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 allows a fraction of the donation to be written off from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is allowed. However, the deduction rate may change depending on the nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a great advantage for an ngo registration NGO as it allows 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 meeting social goals.

Moreover, 80G registration is often demanded 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.
80G Registration Requirements

To qualify for 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration involves 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 applicable for five years.
How Donors Benefit from Section 80G

Section 80G of the Income Tax Act offers a system 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 donating to an 80G registered NGO can claim a deduction under Section 80G.

The tax 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.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is useful for NGOs. 12A registration helps an NGO get exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by enabling them claim 80G deductions on their donations. These registrations boost 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 navigate the registration processes and follow tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services provide assistance 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.
Setting Up a Trust for NGOs

For organizations that are planning to start an NGO, trust registration is one of the most popular ways to form a non-profit entity. In India, a charitable trust is typically formed by executing a trust deed, which details 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 getting 12A and 80G registration. It lays the groundwork for the NGO’s activities and allows it to operate as a recognized entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive tax exemptions and attract more donors. 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 enjoy tax benefits, while 12A registration guarantees that the NGO’s income is exempt from tax.

If you are planning to establish an NGO or are an current one looking to get these registrations, it’s recommended to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all criteria. These actions will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.