12A Registration Overview

12A Registration Overview

Blog Article

12A Registration Overview

Charitable organizations are important in solving many societal problems. To enhance their effectiveness, many NGOs seek registration under designated parts of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will look into the benefits and procedures of getting registered under 80G registration and 12A, which are essential for NGOs wanting financial support and credibility.
What is 12A Registration?

12A registration is a vital process for an NGO to be recognized as a charitable institution under Indian law. The approval permits the NGO to benefit from income tax exemptions on their income. This means that the income received by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a requirement for receiving grants and donations from various sources.

To get 12A registration, the NGO must submit 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.
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 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 change depending on the nature of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an 80g deduction NGO as it allows them to gain more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also increases the NGO’s reputation and increases its funding base, which is crucial 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 fulfill 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 needs 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 valid for five years.
How Donors Benefit from Section 80G

Section 80G provides a framework 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 contributing to an 80G registered NGO can receive tax deduction under Section 80G.

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

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables an NGO get exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by enabling 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 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 skilled in handling the complexities of registrations and can guarantee that the application is processed effectively and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are considering forming an NGO, trust registration is one of the most popular ways to form a non-profit entity. In India, a charitable trust is typically formed by executing a trust deed, which outlines the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of obtaining donations and grants.

Trust registration is often the first step before obtaining 12A and 80G registration. It forms the basis for the NGO’s activities and enables it to operate as a recognized 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 attract more donors. 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 get tax relief, while 12A registration makes sure that the NGO’s income is exempt from tax.

If you are considering to start an NGO or are an existing one looking to benefit from these registrations, it’s suggested to seek advice from professionals in NGO consultancy to guide you through the process and guarantee compliance with all regulations. These measures will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.