12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

Non-Governmental Organizations are important in solving many community challenges. To enhance 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 registration, which are key for NGOs wanting financial support and credibility.
Understanding 12A Registration

12A certificate is a crucial process for an NGO to get acknowledged as a charitable institution under Indian law. The registration enables the NGO to benefit from 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 requirement for obtaining grants and donations from various sources.

To get 12A registration, the NGO must provide 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



Section 80G of the Income Tax Act enables 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 provides for 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 category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an 12a NGO as it helps them to gain more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is essential 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.
80G Registration Requirements

To qualify for 80G registration, an NGO must meet particular criteria:

Charitable Objective: The NGO should not be involved in any commercial activities, and its primary objective must be charitable.
No Misuse of Funds: 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 involves the NGO to submit 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 effective for five years.
How Donors Benefit from Section 80G

Section 80G offers a system through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Individuals, companies, and other entities donating to an 80G registered NGO can claim a deduction 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 useful for NGOs. 12A registration helps an NGO claim 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 handle the registration processes and adhere to 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 ensure that the application is processed without hassle 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 set up by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is filed with the registrar, making the organization an official entity capable of receiving donations and grants.

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

Registering an NGO under Section 12A and Section 80G is crucial for any organization looking to get 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 benefit from tax deductions, while 12A registration ensures that the NGO’s income is tax-free.

If you are considering to establish an NGO or are an existing one looking to benefit from these registrations, it’s recommended to consult with experts in NGO consultancy to assist you through the process and make sure compliance with all criteria. These measures will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.