12A Registration Overview

12A Registration Overview

Blog Article

12A Registration Overview

Non-Governmental Organizations play a vital role in addressing various social issues. To increase their impact, many NGOs get registered under designated parts of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will examine the advantages and steps of registering under Section 80G and 12A registration, 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 organization under Indian law. The registration enables the NGO to obtain income tax exemptions on their income. This means that the income generated 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 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



Section 80G of the Income Tax Act permits donors to avail tax 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 offer 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 granted. However, the deduction rate may vary depending on the category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a major advantage for an 80g registration NGO as it helps them to attract more donors. When donors realize they can claim tax deductions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows 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 meet specific criteria:

Non-commercial Nature: The NGO should not be involved in 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.
Formal Setup: 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 offers a system through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging 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 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 allowed a 100% deduction.
Why 12A and 80G Matter for 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 motivates donors to contribute by enabling 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.
Consultancy for NGOs

For NGOs looking to manage the registration processes and follow tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services help with 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 widely used ways to form a non-profit entity. In India, a charitable trust is typically formed 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 forms the basis for the NGO’s activities and enables it to operate as a legal entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is crucial for any organization wanting 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 motivated to contribute, knowing they can benefit from tax deductions, while 12A registration ensures that the NGO’s income is not taxable.

If you are looking to start an NGO or are an existing one looking to take advantage of these registrations, it’s suggested to seek advice from professionals in NGO consultancy to assist you through the process and ensure compliance with all criteria. These steps will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.