What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

Charitable organizations play a vital role in tackling various social issues. 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 explore the pros and procedures of getting registered under 80G registration and 12A, which are important for NGOs seeking financial support and credibility.
Understanding 12A Registration

12A registration is a crucial process for an NGO to gain recognition as a non-profit entity under Indian law. The process enables the NGO to obtain income tax exemptions on their income. This means that the income earned 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 requirement for obtaining grants and donations from various sources.

To register for 12A registration, the NGO must file 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.
Section 80G Explained



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

The 80G deduction provides for a portion 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 category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an 80g deduction NGO as it allows them to gain more donors. When donors realize they can claim tax deductions 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 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 get 80G registration, an NGO must meet specific 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.
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 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 provides a framework through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Persons, companies, and other entities donating to an 80G registered NGO can get tax relief 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 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 avail exemptions on income, reducing their tax liability, while 80G registration helps donors to contribute by allowing them claim 80G deductions on their donations. These registrations boost the credibility of the NGO, allowing them to gain financial support from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to handle the registration processes and follow tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services provide assistance 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 guarantee that the application is processed effectively and in a timely manner.
Setting Up a Trust for NGOs

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 formed by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is filed with 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

Getting registered an NGO under Section 12A and Section 80G is important 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 encouraged to contribute, knowing they can get tax relief, while 12A registration makes sure that the NGO’s income is tax-free.

If you are planning to establish an NGO or are an current one looking to take advantage of these registrations, it’s advisable to get guidance from consultants in NGO consultancy to guide you through the process and make sure compliance with all regulations. These steps will not only enhance your NGO's credibility but also aid in growing your outreach and financial stability.