Understanding 12A Registration

Understanding 12A Registration

Blog Article

12A Registration Overview

Charitable organizations are crucial in solving various societal problems. To increase their effectiveness, many NGOs get registered under specific sections of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will explore the advantages and process of getting registered under Section 80G and 12A, which are important for NGOs aiming for financial support and credibility.
Understanding 12A Registration

12A registration is a important process for an NGO to be recognized as a non-profit entity under Indian law. The approval enables the NGO to benefit from income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a requirement for gaining 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 deed of trust or organization memorandum, PAN card, and details of activities.
What is Section 80G?



Section 80G of the Income Tax Act allows donors to claim deductions on their taxable income against donations made to eligible NGOs. This section encourages 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 provides for 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 permitted. However, the deduction rate may change depending on the type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an section 80g NGO as it enables them to gain more donors. When donors understand they can get tax benefits on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts its funding base, which is crucial 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.
80G Registration Requirements

To be eligible for 80G registration, an NGO must meet particular criteria:

Charitable Objective: The NGO should not be involved in any commercial activities, and its primary objective must be charitable.
Accountability for 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 requires the NGO to furnish 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.
Tax Savings Under 80G

Section 80G provides a framework through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. People, companies, and other entities making donations to an 80G registered NGO can receive tax deduction under Section 80G.

The deduction amount 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 eligible for a 100% deduction.
Why 12A and 80G Matter for NGOs

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.
How NGO Consultancy Can Help

For NGOs looking to handle 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 knowledgeable in handling the complexities of registrations and can guarantee that the application is processed effectively 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 popular ways to form a non-profit entity. In India, a charitable trust is typically set up 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 receiving 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 legal entity under the law.
Final Thoughts

Becoming registered an NGO under Section 12A and Section 80G is crucial for any organization wanting tax exemptions and attract more donors. These registrations provide substantial benefits, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged 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 planning to establish an NGO or are an existing one looking to benefit from these registrations, it’s advisable to consult with experts in NGO consultancy to guide you through the process and ensure 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.