Understanding 12A Registration

Understanding 12A Registration

Blog Article

What is 12A Registration?

Charitable organizations are important in solving many social issues. To increase their impact, many NGOs apply for registration under certain provisions of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will examine the benefits and process of registering under Section 80G and 12A registration, which are key for NGOs aiming for financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a important process for an NGO to get acknowledged as a charitable organization under Indian law. The registration permits 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 boosts the credibility of an NGO and is often a necessary step 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 deed of trust or memorandum of association, PAN card, and details of activities.
Understanding 80G Registration



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 grant tax benefits to its donors.

The 80G deduction permits 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 change depending on the category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an section 80g NGO as it allows them to bring in more donors. When donors understand they can receive tax exemptions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is essential 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 be eligible for 80G registration, an NGO must satisfy certain criteria:

Charitable Objective: The NGO should not be engaged 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.
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 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 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 receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. People, companies, and other entities making donations 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 allowed a 100% deduction.
Importance of 12A and 80G Registration for 80g registration 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 encourages donors to contribute by enabling them claim 80G deductions on their donations. These registrations increase the credibility of the NGO, allowing them to gain financial support from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
How NGO Consultancy Can Help

For NGOs looking to navigate the registration processes and follow 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 guarantee that the application is processed without hassle and in a timely manner.
Trust Registration for NGOs

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 formed 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 getting 12A and 80G registration. It lays the groundwork for the NGO’s activities and allows it to operate as a legal entity under the law.
Conclusion

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive tax exemptions and increase donations. 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 ensures that the NGO’s income is tax-free.

If you are considering to form an NGO or are an existing one looking to get these registrations, it’s suggested to consult with experts in NGO consultancy to assist you through the process and make sure compliance with all criteria. These actions will not only enhance your NGO's credibility but also aid in growing your outreach and financial stability.