What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

NGOs play a vital role in tackling many social issues. To enhance their efficiency, many NGOs get registered under designated parts of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will examine the pros and procedures of registering under Section 80G and 12A, which are key for NGOs seeking financial support and credibility.
Understanding 12A Registration

12A certificate is a important process for an NGO to be recognized as a non-profit entity under Indian law. The process enables 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 boosts the credibility of an NGO and is often a necessary step for gaining grants and donations from various sources.

To apply 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 organization memorandum, PAN card, and details of activities.
Section 80G Explained



Section 80G of the Income Tax Act enables donors to claim deductions on their taxable income against donations made to eligible NGOs. This section motivates 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 permits a portion of the donation to be reduced 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 nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a significant advantage for an 12a NGO as it helps them to attract more donors. When donors understand they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts its funding base, which is essential 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 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 fulfill particular criteria:

Non-Profit Status: The NGO should not be engaged in 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.
Registration: 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 lays down provisions through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Persons, companies, and other entities making donations to an 80G registered NGO can claim a deduction under Section 80G.

The eligible 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 useful for NGOs. 12A registration allows an NGO avail 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 enhance the credibility of the NGO, allowing them to attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
How NGO Consultancy Can Help

For NGOs looking to handle the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services provide assistance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are experienced in handling the complexities of registrations and can ensure that the application is processed smoothly and in a timely manner.
Trust Registration for NGOs

For organizations that are planning to start 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 set up 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 receiving donations and grants.

Trust registration is often the first step before applying for 12A and 80G registration. It lays the groundwork for the NGO’s activities and permits it to operate as a legal entity under the law.
Summary

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 encouraged to contribute, knowing they can enjoy tax benefits, while 12A registration makes sure that the NGO’s income is tax-free.

If you are planning to form an NGO or are an current one looking to benefit from these registrations, it’s suggested to get guidance from consultants in NGO consultancy to assist you through the process and ensure compliance with all criteria. These steps will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.