12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

Charitable organizations are important in solving many societal problems. To enhance their effectiveness, many NGOs seek registration under designated parts of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will explore the benefits and process of getting registered under 80G registration and 12A, which are essential for NGOs aiming for 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 organization under Indian law. The approval permits the NGO to benefit from 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 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 provide an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust or memorandum of association, PAN card, and details of activities.
Understanding 80G Registration



80G of Income Tax Act of the Income Tax Act permits 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 important aspect 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 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 vary depending on the category of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a great advantage for an 80g registration NGO as it allows 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 increases its funding base, which is critical for fulfilling 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 obtain large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

To get 80G registration, an NGO must meet specific criteria:

Non-Profit Status: 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 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.
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. Individuals, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.

The tax 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 allowed a 100% deduction.
Importance of 12A and 80G Registration for 80g deduction NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration enables an NGO avail 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 increase the credibility of the NGO, allowing them to attract funding 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 helpful. NGO consultancy services help with 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 guarantee that the application is processed effectively 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 widely used ways to form a non-profit entity. In India, a charitable trust is typically formed by executing a trust deed, which defines 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 allows it to operate as a acknowledged entity under the law.
Final Thoughts

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization wanting tax exemptions and increase donations. 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 ensures that the NGO’s income is not taxable.

If you are looking to establish an NGO or are an current one looking to benefit from these registrations, it’s recommended to seek advice from professionals in NGO consultancy to help you through the process and make sure compliance with all requirements. These steps will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.