Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

NGOs are crucial in addressing numerous societal problems. To increase their efficiency, many NGOs get registered under specific sections of the Income Tax Act to obtain tax benefits and incentives for contributors. In this article, we will examine the benefits and steps of getting registered under Section 80G and 12A, which are important for NGOs aiming for financial support and credibility.
What is 12A Registration?

12A certificate is a vital process for an NGO to be recognized as a non-profit entity under Indian law. The registration permits the NGO to obtain 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 requirement for receiving 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 legal trust document or MOA, PAN card, and details of activities.
What is Section 80G?



80G of Income Tax Act of the Income Tax Act allows donors to avail tax deductions 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 provide 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 permitted. However, the deduction rate may change depending on the nature of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a great advantage for an 12a NGO as it allows them to attract more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and grows its funding base, which is crucial for achieving 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 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-commercial Nature: 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 requires 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 applicable for five years.
How Donors Benefit from Section 80G

Section 80G lays down provisions through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Persons, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.

The eligible deduction 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.
Why 12A and 80G Matter for NGOs

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

For NGOs looking to manage the registration processes and follow tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services offer guidance 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 guarantee that the application is processed without hassle 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 popular 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 submitted to the registrar, making the organization an official entity capable of gaining 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 allows it to operate as a acknowledged 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 exempt from tax.

If you are planning to start an NGO or are an current one looking to take advantage of these registrations, it’s advisable to seek advice from professionals in NGO consultancy to assist you through the process and make sure compliance with all regulations. These steps will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.