What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

NGOs are crucial in solving numerous community challenges. To increase their impact, many NGOs apply for registration under designated parts of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will explore the benefits and steps of registering under section 80g of income tax act and 12A registration, which are key for NGOs seeking financial support and credibility.
12A Registration Overview

12A certificate is a vital process for an NGO to be recognized as a charitable organization under Indian law. The process enables the NGO to benefit from income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn enables the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a prerequisite for gaining 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 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 enables 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 key feature for NGOs seeking public funding. An NGO must obtain 80G registration to grant tax benefits to its donors.

The 80G deduction permits a percentage of the donation to be written off from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is granted. However, the deduction rate may differ depending on the type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a major advantage for an ngo consultancy NGO as it allows them to gain more donors. When donors understand they can get tax benefits 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 achieving 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 obtain 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 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.
Legal Status: 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 effective for five years.
How Donors Benefit from Section 80G

Section 80G of the Income Tax Act offers a system 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 making donations to an 80G registered NGO can get tax relief 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 eligible for a 100% deduction.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration enables an NGO avail exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by allowing them claim 80G deductions on their donations. These registrations enhance the credibility of the NGO, allowing them to gain financial support 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 helpful. 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 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 widely used ways to form a non-profit entity. In India, a charitable trust is typically registered by executing a trust deed, which outlines 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 getting 12A and 80G registration. It lays the groundwork for the NGO’s activities and enables it to operate as a legal entity under the law.
Summary

Getting registered an NGO under Section 12A and Section 80G is essential for any organization aiming to receive tax exemptions and gain more supporters. These registrations provide substantial benefits, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is not taxable.

If you are considering to start an NGO or are an current one looking to get these registrations, it’s advisable to consult with experts in NGO consultancy to help you through the process and make sure compliance with all regulations. These actions will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.