Understanding 12A Registration

Understanding 12A Registration

Blog Article

What is 12A Registration?

NGOs play a vital role in solving various community challenges. To enhance their efficiency, many NGOs seek registration under certain provisions of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will examine the benefits and steps of getting registered under Section 80G and 12A, which are essential for NGOs aiming for financial support and credibility.
What is 12A Registration?

12A certificate is a vital process for an NGO to gain recognition as a charitable organization under Indian law. The process enables 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 helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a necessary step for obtaining grants and donations from various sources.

To apply for 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 MOA, PAN card, and details of activities.
Understanding 80G Registration



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

The 80G deduction permits 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.
Why NGOs Need 80G Registration

Obtaining 80G registration is a significant advantage for an section 80g NGO as it enables them to attract 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 achieving 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.
Eligibility and Process for 80G Registration

To qualify for 80G registration, an NGO must fulfill certain criteria:

Non-Profit Status: 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 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 benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. People, companies, and other entities making donations to an 80G registered NGO can get tax relief 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.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is useful for NGOs. 12A registration helps an NGO get 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 enhance 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 manage the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly advantageous. 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 without hassle and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are planning to start an NGO, trust registration is one of the most popular ways to form a non-profit entity. In India, a charitable trust is typically set up by executing a trust deed, which details the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of receiving 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 permits it to operate as a acknowledged entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is important for any organization looking to get 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 benefit from tax deductions, while 12A registration ensures that the NGO’s income is exempt from tax.

If you are looking to start an NGO or are an current one looking to get these registrations, it’s recommended to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all criteria. These actions will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.