What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Non-Governmental Organizations play a vital role in tackling various community challenges. To enhance their impact, many NGOs apply for registration under designated parts of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will look into the pros and steps of getting registered under Section 80G and 12A, which are essential for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a crucial process for an NGO to be recognized as a non-profit entity under Indian law. The registration allows the NGO to avail income tax exemptions on their income. This means that the income earned 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 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.
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 essential tool 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 granted. However, the deduction rate may differ depending on the category of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an 12a registration NGO as it helps them to gain more donors. When donors realize they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and increases its funding base, which is essential for fulfilling 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 obtain large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

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

Non-Profit Status: The NGO should not be conducting any commercial activities, and its primary objective must be charitable.
Accountability for Funds: 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 involves the NGO to submit 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 provides a framework 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 receive tax deduction under Section 80G.

The tax deduction 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.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is beneficial for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by letting them claim 80G deductions on their donations. These registrations enhance the credibility of the NGO, allowing them to receive funds from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
Consultancy for NGOs

For NGOs looking to handle 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.
Setting Up a Trust for NGOs

For organizations that are looking to establish 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 details the objectives and operational framework of the trust. This legal document is submitted to 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 permits it to operate as a recognized entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is essential for any organization looking to get 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 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 get guidance from consultants in NGO consultancy to guide you through the process and make sure compliance with all regulations. These actions will not only increase your NGO's credibility but also help in expanding your outreach and financial stability.