12A Registration Overview

12A Registration Overview

Blog Article

What is 12A Registration?

Non-Governmental Organizations are crucial in addressing various societal problems. To boost their impact, many NGOs get registered under specific sections of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will look into the pros and process of getting registered under section 80g of income tax act and 12A registration, which are essential for NGOs seeking financial support and credibility.
12A Registration Overview

12A registration is a crucial process for an NGO to get acknowledged as a non-profit entity under Indian law. The approval enables the NGO to avail income tax exemptions on their income. This means that the income received 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 receiving grants and donations from various sources.

To apply for 12A registration, the NGO must provide an application to the jurisdictional Commissioner of Income Tax along with key documents, including the trust deed or memorandum of association, PAN card, and details of activities.
Section 80G Explained



80G of Income Tax Act of the Income Tax Act allows donors to claim deductions 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 granted. However, the deduction rate may vary depending on the type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an 80g registration NGO as it enables them to bring in more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also improves the NGO’s reputation and boosts its funding base, which is critical for meeting social goals.

Moreover, 80G registration is often demanded 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 receive 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:

Charitable Objective: The NGO should not be conducting 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.
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 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 valid for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G lays down provisions through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. People, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.

The deduction amount 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 12a registration NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration allows an NGO claim exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by allowing them claim 80G deductions on their donations. These registrations increase 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 handle the registration processes and follow tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services provide assistance 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 smoothly and in a timely manner.
Trust Registration for NGOs

For organizations that are considering forming 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 set up 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 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 permits it to operate as a recognized entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is essential for any organization aiming to receive tax exemptions and increase donations. 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 get tax relief, while 12A registration ensures that the NGO’s income is exempt from tax.

If you are planning 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 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.