12A Registration Overview

12A Registration Overview

Blog Article

12A Registration Overview

NGOs are crucial in addressing numerous community challenges. To boost 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 look into the pros and steps of registering under section 80g of income tax act and 12A, which are key for NGOs aiming for financial support and credibility.
What is 12A Registration?

12A registration is a important process for an NGO to gain recognition as a non-profit entity under Indian law. The registration enables 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 supports 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 obtaining grants and donations from various sources.

To apply for 12A registration, the NGO must file 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.
What is Section 80G?



80G of the Income Tax Act permits donors to claim 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 provide tax benefits to its donors.

The 80G deduction allows a fraction 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 change depending on the nature of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an 80g deduction NGO as it enables them to bring in more donors. When donors understand they can receive tax exemptions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is critical 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 get large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

To get 80G registration, an NGO must fulfill particular criteria:

Non-commercial Nature: 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.
Formal Setup: 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.
Tax Savings Under 80G

Income Tax Act 80G lays down provisions through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Individuals, companies, and other entities making donations to an 80G registered NGO can receive tax 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 granted a 100% deduction.
Importance of 12A and 80G Registration for 80g registration NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration enables an NGO claim 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 boost the credibility of the NGO, allowing them to attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
Consultancy for NGOs

For NGOs looking to handle the registration processes and follow 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 knowledgeable in handling the complexities of registrations and can guarantee that the application is processed without hassle 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 widely used 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 receiving 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 enables 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 attract more donors. 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 get these registrations, it’s suggested to consult with experts in NGO consultancy to guide you through the process and make sure compliance with all regulations. These actions will not only increase your NGO's credibility but also help in expanding your outreach and financial stability.