Understanding 12A Registration

Understanding 12A Registration

Blog Article

12A Registration Overview

Charitable organizations play a vital role in solving numerous societal problems. To boost their efficiency, many NGOs apply for registration under specific sections of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will examine the benefits and process of registering under Section 80G and 12A, which are key for NGOs aiming for financial support and credibility.
Understanding 12A Registration

12A of Income Tax Act is a important process for an NGO to gain recognition as a non-profit entity 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 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 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 Income Tax Act of the Income Tax Act allows donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section encourages 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 provides for a percentage of the donation to be written off 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 80g registration NGO as it enables them to bring in more donors. When donors realize they can claim tax deductions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows its funding base, which is critical for meeting 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.
How to Get 80G Registration

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

The application for 80G registration requires 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.
Tax Savings Under 80G

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. Persons, companies, and other entities donating to an 80G registered NGO can receive tax deduction under Section 80G.

The eligible 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 granted a 100% deduction.
Importance of 12A and 80G Registration for trust registration NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables an NGO avail exemptions on income, reducing their tax liability, while 80G registration helps donors to contribute by letting them claim 80G deductions on their donations. These registrations boost 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 navigate 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 make sure that the application is processed without hassle and in a timely manner.
How to Register a Trust

For organizations that are looking to establish an NGO, trust registration is one of the most common ways to form a non-profit entity. In India, a charitable trust is typically registered 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 gaining 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 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 ensures that the NGO’s income is not taxable.

If you are looking to establish an NGO or are an already established one looking to get these registrations, it’s advisable to consult with experts in NGO consultancy to help you through the process and make sure compliance with all requirements. These actions will not only enhance your NGO's credibility but also help in expanding your outreach and financial stability.