What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Non-Governmental Organizations are important in solving numerous social issues. To enhance their effectiveness, many NGOs seek registration under designated parts of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will examine the advantages and steps of registering under 80G registration and 12A, which are important for NGOs seeking financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a important process for an NGO to be recognized as a charitable organization under Indian law. The process allows the NGO to obtain income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a requirement 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 legal trust document or MOA, PAN card, and details of activities.
What is Section 80G?



80G of the Income Tax Act allows donors to avail tax deductions 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 permits 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 type of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an section 80g NGO as it enables them to attract more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and grows its funding base, which is critical 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 receive large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

To qualify for 80G registration, an NGO must satisfy certain 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.
Legal Status: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration involves the NGO to furnish 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.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G of the Income Tax Act lays down provisions through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. People, companies, and other entities making donations 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.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration enables an NGO avail exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by letting them claim 80G deductions on their donations. These registrations increase the credibility of the NGO, allowing them to gain financial support 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 make sure that the application is processed effectively and in a timely manner.
Trust Registration for NGOs

For organizations that are looking to establish an NGO, trust registration is one of the most popular 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 registered with the registrar, making the organization an official entity capable of obtaining 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 recognized entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is important for any organization aiming to receive 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 motivated to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is tax-free.

If you are considering to start an NGO or are an already established one looking to get these registrations, it’s advisable to get guidance from consultants in NGO consultancy to guide you through the process and make sure compliance with all criteria. These measures will not only boost your NGO's credibility but also help in expanding your outreach and financial stability.