What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Non-Governmental Organizations play a vital role in addressing numerous societal problems. To enhance their effectiveness, many NGOs get registered under certain provisions of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will examine the advantages and procedures of getting registered under section 80g of income tax act and 12A, which are important 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 charitable institution under Indian law. The process permits 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 helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a prerequisite 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 trust deed or MOA, PAN card, and details of activities.
Understanding 80G Registration



Section 80G of the Income Tax Act allows 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 grant tax benefits to its donors.

The 80G deduction provides for a percentage of the donation to be deducted 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 type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a great advantage for an ngo registration NGO as it helps them to gain more donors. When donors realize 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 crucial for meeting 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 receive 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-Profit Status: The NGO should not be conducting any commercial activities, and its primary objective must be charitable.
Accountability for Funds: 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 needs the NGO to provide documents such as the trust deed, 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.
How Donors Benefit from Section 80G

Section 80G of the Income Tax Act offers a system through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Persons, companies, and other entities donating to an 80G registered NGO can receive tax deduction 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 beneficial for NGOs. 12A registration enables an NGO get exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by letting them claim 80G deductions on their donations. These registrations boost 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 follow tax regulations, engaging an NGO consultancy can be highly beneficial. 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 guarantee 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 common ways to form a non-profit entity. In India, a charitable trust is typically set up by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of obtaining donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It forms the basis for the NGO’s activities and allows it to operate as a acknowledged 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 offer major advantages, 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 guarantees that the NGO’s income is exempt from tax.

If you are considering to establish an NGO or are an current one looking to take advantage of these registrations, it’s advisable to seek advice from professionals in NGO consultancy to help you through the process and guarantee compliance with all requirements. These steps will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.