What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Charitable organizations are crucial in addressing numerous social issues. To boost their effectiveness, many NGOs get registered under designated parts of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will examine the advantages and steps of getting registered under 80G registration and 12A registration, which are essential for NGOs aiming for financial support and credibility.
12A Registration Overview

12A certificate is a vital process for an NGO to gain recognition as a non-profit entity under Indian law. The approval enables 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 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 receiving grants and donations from various sources.

To apply 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



80G of the Income Tax Act enables donors to avail tax 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 permits 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 differ depending on the nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an 80g deduction NGO as it allows them to attract more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is critical for achieving 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 receive large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

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

Non-commercial Nature: The NGO should not be involved 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.
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 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 applicable for five years.
Tax Savings Under 80G

Income Tax Act 80G offers a system through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Individuals, 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 helps an NGO avail 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 increase 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 handle the registration processes and follow 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 make sure 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 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 filed with the registrar, making the organization an official entity capable of obtaining 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 allows it to operate as a legal entity under the law.
Summary

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 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 considering to form an NGO or are an already established one looking to take advantage of these registrations, it’s suggested to consult with experts in NGO consultancy to guide you through the process and make sure compliance with all requirements. These actions will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.