What is 12A Registration?

Wiki Article

12A Registration Overview

Charitable organizations play a vital role in tackling many societal problems. To increase their impact, many NGOs get registered under designated parts of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will explore the benefits and process of getting registered under 80G registration and 12A, which are key for NGOs seeking financial support and credibility.
Understanding 12A Registration

12A registration is a crucial process for an NGO to gain recognition as a charitable institution under Indian law. The process permits the NGO to avail income tax exemptions on their income. This means that the income generated 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 prerequisite for gaining 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 trust deed 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 promotes individuals and corporations to contribute to charities, making it an important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction allows a percentage of the donation to be reduced from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is granted. However, the deduction rate may vary depending on the type of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an section 80g of income tax act NGO as it helps them to attract more donors. When donors understand 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 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 get large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

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

Non-commercial Nature: The NGO should not be conducting 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 provide 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 valid for five years.
How Donors Benefit from Section 80G

Section 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. People, 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.
Benefits of Both 12A and 80G

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 attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

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 guarantee that the application is processed without hassle and in a timely manner.
How to Register a Trust

For organizations that are planning to start 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 formed 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 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.
Final Thoughts

Registering an NGO under Section 12A and Section 80G is crucial for any organization wanting tax exemptions and increase donations. 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 not taxable.

If you are planning to start an NGO or are an already established one looking to benefit from these registrations, it’s recommended to consult with experts in NGO consultancy to guide you through the process and make sure compliance with all criteria. These measures will not only enhance your NGO's credibility but also help in expanding your outreach and financial stability.