What is 12A Registration?

What is 12A Registration?

Blog Article

Understanding 12A Registration

Charitable organizations play a vital role in solving numerous social issues. To increase their efficiency, many NGOs seek registration under certain provisions of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will explore the advantages and procedures of registering under section 80g of income tax act and 12A registration, which are important for NGOs seeking financial support and credibility.
Understanding 12A Registration

12A registration is a crucial process for an NGO to get acknowledged as a charitable institution under Indian law. The approval permits the NGO to avail income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a prerequisite for obtaining grants and donations from various sources.

To register 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 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 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 differ depending on the category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an ngo registration NGO as it enables them to attract more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows its funding base, which is essential for fulfilling 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 obtain large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

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

Charitable Objective: 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.
Legal Status: 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 effective for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Income Tax Act 80G offers a system 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 specific portion 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.
Importance of 12A and 80G Registration for section 80g NGOs

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

For NGOs looking to navigate the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly beneficial. 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 effectively and in a timely manner.
Trust Registration for NGOs

For organizations that are considering forming an NGO, trust registration is one of the most common 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 registered with the registrar, making the organization an official entity capable of receiving donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It lays the groundwork for the NGO’s activities and allows it to operate as a recognized entity under the law.
Summary

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive 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 enjoy tax benefits, while 12A registration ensures that the NGO’s income is exempt from tax.

If you are looking to start an NGO or are an current one looking to get these registrations, it’s suggested to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all criteria. These actions will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.