12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

Charitable organizations play a vital role in tackling numerous societal problems. To increase their efficiency, many NGOs seek registration 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 getting registered under section 80g of income tax act and 12A, which are key for NGOs aiming for financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a important process for an NGO to gain recognition as a non-profit entity under Indian law. The approval permits the NGO to benefit from 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 gaining grants and donations from various sources.

To get 12A registration, the NGO must provide an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or memorandum of association, PAN card, and details of activities.
What is Section 80G?



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

The 80G deduction allows 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 allowed. 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 significant advantage for an trust registration NGO as it helps them to attract more donors. When donors realize they can receive tax exemptions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows its funding base, which is crucial for meeting social goals.

Moreover, 80G registration is often demanded 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 fulfill specific 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.
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 valid for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

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. Persons, companies, and other entities donating to an 80G registered NGO can receive tax deduction under Section 80G.

The deduction amount 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 eligible for a 100% deduction.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration allows an NGO get exemptions on income, reducing their tax liability, while 80G registration motivates 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 navigate the registration processes and adhere to 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 make sure that the application is processed effectively and in a timely manner.
Setting Up a Trust 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 formed by executing a trust deed, which details 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 applying for 12A and 80G registration. It provides the foundation for the NGO’s activities and enables it to operate as a recognized entity under the law.
Final Thoughts

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive 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 exempt from tax.

If you are looking to form an NGO or are an existing one looking to get these registrations, it’s recommended to get guidance from consultants in NGO consultancy to guide you through the process and ensure compliance with all regulations. These steps will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.