Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

NGOs play a vital role in tackling numerous social issues. To boost their impact, many NGOs seek registration under certain provisions of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will look into the advantages and steps of getting registered under section 80g of income tax act and 12A, which are key for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a vital process for an NGO to get acknowledged as a non-profit entity under Indian law. The approval enables the NGO to obtain 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 increases 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 file an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust or MOA, PAN card, and details of activities.
Section 80G Explained



80G of the Income Tax Act enables 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 grant tax benefits to its donors.

The 80G deduction allows a portion of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is permitted. However, the deduction rate may differ 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 12a NGO as it enables them to gain more donors. When donors know 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 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.
80G Registration Requirements

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

Charitable Objective: 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

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

Income Tax Act 80G provides a framework through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Persons, companies, and other entities making donations to an 80G registered NGO can get tax relief under Section 80G.

The tax deduction is limited to a part 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.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by allowing them claim 80G deductions on their donations. These registrations increase the credibility of the NGO, allowing them to receive funds from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to navigate the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services offer guidance 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 considering forming 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 outlines the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of obtaining donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It forms the basis 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 essential for any organization wanting 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 encouraged to contribute, knowing they can enjoy tax benefits, while 12A registration makes sure that the NGO’s income is exempt from tax.

If you are considering to start an NGO or are an existing one looking to take advantage of these registrations, it’s recommended to consult with experts in NGO consultancy to assist you through the process and ensure compliance with all criteria. These measures will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.