What is 12A Registration?

What is 12A Registration?

Blog Article

Understanding 12A Registration

Non-Governmental Organizations are important in tackling numerous social issues. To boost their effectiveness, many NGOs apply for registration under designated parts of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will explore the advantages and process of registering under 80G registration and 12A registration, which are essential for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act 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 get 12A registration, the NGO must submit 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.
Section 80G Explained



80G of the Income Tax Act enables donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section promotes 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 fraction 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.
Advantages of 80G

Obtaining 80G registration is a great advantage for an section 80g of income tax act 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 crucial 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 obtain large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

To be eligible for 80G registration, an NGO must satisfy specific criteria:

Non-commercial Nature: The NGO should not be engaged 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.
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 get deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Persons, companies, and other entities contributing to an 80G registered NGO can claim a deduction under Section 80G.

The deduction amount 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 motivates donors to contribute by allowing them claim 80G deductions on their donations. These registrations boost 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 manage the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services provide assistance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are skilled in handling the complexities of registrations and can make sure that the application is processed smoothly and in a timely manner.
How to Register a Trust

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 registered by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is registered with the registrar, making the organization an official entity capable of gaining 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 permits it to operate as a recognized entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is essential for any organization looking to get 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 more likely to contribute, knowing they can benefit from tax deductions, while 12A registration makes sure that the NGO’s income is not taxable.

If you are planning 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 measures will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.