Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

NGOs are crucial in addressing many social issues. To increase 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 explore the advantages and process of registering under Section 80G and 12A, which are essential for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a crucial process for an NGO to be recognized as a non-profit entity under Indian law. The registration permits the NGO to obtain income tax exemptions on their income. This means that the income received 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 requirement for obtaining grants and donations from various sources.

To get 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or MOA, PAN card, and details of activities.
Understanding 80G Registration



80G of Income Tax Act 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 offer tax benefits to its donors.

The 80G deduction allows a portion 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 vary depending on the nature of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a significant advantage for an 12a registration NGO as it allows them to attract more donors. When donors know they can receive tax exemptions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and boosts its funding base, which is critical for fulfilling 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 get large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

Non-commercial Nature: The NGO should not be engaged in 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.
Registration: 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 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.
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 motivating donations. People, companies, and other entities contributing to an 80G registered NGO can claim a deduction under Section 80G.

The tax 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 allowed a 100% deduction.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps an NGO get exemptions on income, reducing their tax liability, while 80G registration helps donors to contribute by letting them claim 80G deductions on their donations. These registrations increase 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 manage the registration processes and follow 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 experienced in handling the complexities of registrations and can ensure that the application is processed smoothly and in a timely manner.
How to Register a Trust

For organizations that are considering forming 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 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 provides the foundation for the NGO’s activities and permits it to operate as a acknowledged entity under the law.
Summary

Getting registered an NGO under Section 12A and Section 80G is important for any organization aiming to receive 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 more likely to contribute, knowing they can enjoy tax benefits, while 12A registration makes sure that the NGO’s income is tax-free.

If you are planning to form an NGO or are an current one looking to benefit from these registrations, it’s suggested to get guidance from consultants in NGO consultancy to assist you through the process and ensure compliance with all criteria. These steps will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.