12A Registration Overview

12A Registration Overview

Blog Article

12A Registration Overview

NGOs are important in addressing many societal problems. To boost their efficiency, many NGOs apply for registration under certain provisions of the Income Tax Act to benefit from tax relief and incentives for contributors. In this article, we will explore the pros and steps of registering under Section 80G and 12A registration, which are important for NGOs seeking financial support and credibility.
12A Registration Overview

12A certificate is a crucial process for an NGO to get acknowledged as a charitable organization under Indian law. The registration enables 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 helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also enhances the credibility of an NGO and is often a necessary step for gaining 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 organization memorandum, PAN card, and details of activities.
Section 80G Explained



80G of Income Tax Act of the Income Tax Act enables 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 essential tool for NGOs seeking public funding. An NGO must obtain 80G registration to offer 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 granted. However, the deduction rate may change depending on the nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a significant advantage for an section 80g NGO as it helps them to attract more donors. When donors understand they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts its funding base, which is essential for fulfilling social goals.

Moreover, 80G registration is often required 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.
Eligibility and Process for 80G Registration

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

Non-Profit Status: The NGO should not be engaged in 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration requires 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 applicable for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G of the Income Tax Act lays down provisions 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 making donations to an 80G registered NGO can claim a deduction under Section 80G.

The eligible 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 granted a 100% deduction.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is useful for NGOs. 12A registration allows 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.
Consultancy for NGOs

For NGOs looking to manage the registration processes and follow tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services provide assistance 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 ensure that the application is processed smoothly and in a timely manner.
Trust Registration for NGOs

For organizations that are planning to start 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 details 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 getting 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.
Conclusion

Becoming registered an NGO under Section 12A and Section 80G is crucial for any organization looking to get tax exemptions and increase donations. These registrations provide substantial benefits, 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 makes sure that the NGO’s income is exempt from tax.

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