What is 12A Registration?

What is 12A Registration?

Blog Article

Understanding 12A Registration

Non-Governmental Organizations are crucial in tackling various social issues. To boost their effectiveness, many NGOs get registered under certain provisions of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will look into the benefits and steps of registering under 80G registration and 12A, which are important for NGOs seeking financial support and credibility.
What is 12A Registration?

12A registration is a important process for an NGO to get acknowledged as a charitable organization under Indian law. The approval allows 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 supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a necessary step for receiving grants and donations from various sources.

To register 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 MOA, PAN card, and details of activities.
What is Section 80G?



Section 80G of the Income Tax Act enables 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 important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction provides for a fraction of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is allowed. 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 80g deduction NGO as it enables them to attract more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and increases its funding base, which is critical for achieving 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 receive large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

To qualify for 80G registration, an NGO must meet specific criteria:

Non-Profit Status: The NGO should not be involved in 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration involves the NGO to furnish 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 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 encouraging donations. Individuals, companies, and other entities making donations to an 80G registered NGO can receive tax deduction under Section 80G.

The eligible deduction 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.
Importance of 12A and 80G Registration for section 80g of income tax act NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration allows an NGO get exemptions on income, reducing their tax liability, while 80G registration helps donors to contribute by enabling 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 helpful. 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 ensure that the application is processed effectively and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are planning to start an NGO, trust registration is one of the most popular 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 filed with 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 provides the foundation for the NGO’s activities and enables it to operate as a acknowledged entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is important for any organization wanting 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 motivated to contribute, knowing they can enjoy tax benefits, while 12A registration guarantees that the NGO’s income is exempt from tax.

If you are planning to establish an NGO or are an current one looking to get these registrations, it’s suggested to get guidance from consultants in NGO consultancy to guide you through the process and ensure compliance with all requirements. These measures will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.