Understanding 12A Registration

Understanding 12A Registration

Blog Article

12A Registration Overview

Non-Governmental Organizations play a vital role in addressing numerous community challenges. To boost their efficiency, many NGOs apply for registration under certain provisions of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will look into the advantages and steps of registering under 80G registration and 12A, which are essential for NGOs aiming for financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a important process for an NGO to be recognized as a charitable organization under Indian law. The approval allows the NGO to avail income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases 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 organization memorandum, PAN card, and details of activities.
What is Section 80G?



80G of the Income Tax Act enables donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section encourages individuals and corporations to contribute to charities, making it an key feature for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction provides for a percentage 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 permitted. However, the deduction rate may vary depending on the nature of the NGO and the type of donation.
Advantages of 80G

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

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

Charitable Objective: The NGO should not be conducting 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.
Formal Setup: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration requires the NGO to submit 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 effective for five years.
Tax Savings Under 80G

Section 80G of the Income Tax Act offers a system through which donors can benefit from 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 claim a deduction 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 granted a 100% deduction.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps an NGO claim exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by allowing 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 handle the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services help with 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 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 formed by executing a trust deed, which defines 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 applying for 12A and 80G registration. It provides the foundation for the NGO’s activities and allows it to operate as a recognized entity under the law.
Summary

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization wanting tax exemptions and gain more supporters. These registrations are highly beneficial, 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 guarantees that the NGO’s income is not taxable.

If you are looking to establish an NGO or are an already established one looking to get these registrations, it’s recommended to consult with experts in NGO consultancy to assist you through the process and ensure compliance with all requirements. These steps will not only increase your NGO's credibility but also help in expanding your outreach and financial stability.