What is 12A Registration?

What is 12A Registration?

Blog Article

Understanding 12A Registration

Non-Governmental Organizations play a vital role in addressing numerous community challenges. To boost their efficiency, many NGOs apply for registration under certain provisions of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will explore the benefits and process of getting registered under section 80g of income tax act and 12A registration, which are essential for NGOs aiming for financial support and credibility.
Understanding 12A Registration

12A registration is a crucial process for an NGO to get acknowledged as a charitable organization under Indian law. The process allows 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 helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a prerequisite for obtaining grants and donations from various sources.

To get 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.
Understanding 80G Registration



80G of the Income Tax Act allows 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 provide tax benefits to its donors.

The 80G deduction provides for a portion of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is permitted. However, the deduction rate may differ depending on the type 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 understand they can receive tax exemptions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows 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 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 particular criteria:

Non-commercial Nature: 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 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.
Section 80G of Income Tax Act: Tax Deduction for Donors

Income Tax Act 80G provides a framework through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. People, companies, and other entities contributing to an 80G registered NGO can claim a 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 allowed 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 helps an NGO claim exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by letting 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 manage the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services help with 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 make sure that the application is processed effectively and in a timely manner.
How to Register a Trust

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 registered 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 gaining donations and grants.

Trust registration is often the first step before obtaining 12A and 80G registration. It lays the groundwork for the NGO’s activities and permits it to operate as a legal 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 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 enjoy tax benefits, while 12A registration guarantees that the NGO’s income is exempt from tax.

If you are considering to start an NGO or are an existing one looking to take advantage of these registrations, it’s suggested to consult with experts in NGO consultancy to guide you through the process and guarantee compliance with all criteria. These actions will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.