What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

Charitable organizations are important in addressing various social issues. To increase their effectiveness, many NGOs get registered under certain provisions of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will explore the pros and procedures of getting registered under 80G registration 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 charitable organization under Indian law. The registration allows the NGO to benefit from 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 enhances the credibility of an NGO and is often a prerequisite for gaining 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 legal trust document or MOA, PAN card, and details of activities.
Section 80G Explained



Section 80G of the Income Tax Act permits donors to claim deductions on their taxable income against donations made to eligible NGOs. This section promotes 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 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 allowed. However, the deduction rate may differ depending on the category of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an 12a NGO as it enables them to gain more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and increases 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.
Eligibility and Process for 80G Registration

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

Non-commercial Nature: The NGO should not be conducting 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 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.
How Donors Benefit from Section 80G

Section 80G offers a system through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. People, companies, and other entities making donations to an 80G registered NGO can receive tax deduction under Section 80G.

The eligible deduction is limited to a certain percentage 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 12a NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by letting them claim 80G deductions on their donations. These registrations enhance the credibility of the NGO, allowing them to attract funding 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 knowledgeable in handling the complexities of registrations and can ensure that the application is processed effectively and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are looking to establish an NGO, trust registration is one of the most widely used ways to form a non-profit entity. In India, a charitable trust is typically registered 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 applying for 12A and 80G registration. It provides the foundation for the NGO’s activities and enables it to operate as a legal 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 increase donations. These registrations are highly beneficial, 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 ensures that the NGO’s income is tax-free.

If you are planning to start an NGO or are an existing one looking to take advantage of these registrations, it’s recommended to get guidance from consultants in NGO consultancy to guide you through the process and ensure compliance with all requirements. These measures will not only enhance your NGO's credibility but also help in expanding your outreach and financial stability.