Understanding 12A Registration

Understanding 12A Registration

Blog Article

What is 12A Registration?

NGOs play a vital role in tackling many community challenges. To enhance their effectiveness, many NGOs apply for registration under designated parts of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will examine the pros and process of getting registered under Section 80G and 12A, which are key for NGOs wanting financial support and credibility.
What is 12A Registration?

12A registration is a vital process for an NGO to get acknowledged as a non-profit entity under Indian law. The approval enables the NGO to obtain income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also enhances the credibility of an NGO and is often a prerequisite for receiving grants and donations from various sources.

To get 12A registration, the NGO must provide 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?



Section 80G of the Income Tax Act permits 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 essential tool for NGOs seeking public funding. An NGO must obtain 80G registration to grant tax benefits to its donors.

The 80G deduction allows a percentage 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 vary depending on the type of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a major advantage for an section 80g NGO as it helps them to attract more donors. When donors realize they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and increases its funding base, which is crucial for fulfilling 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 obtain large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

To get 80G registration, an NGO must meet certain criteria:

Non-commercial Nature: 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 needs the NGO to furnish 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 valid for five years.
How Donors Benefit from Section 80G

Income Tax Act 80G provides a framework through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. People, companies, and other entities contributing to an 80G registered NGO can claim a deduction under Section 80G.

The deduction amount 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.
Importance of 12A and 80G Registration for trust registration NGOs

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

For NGOs looking to handle the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly beneficial. 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 effectively and in a timely manner.
How to Register a Trust

For organizations that are looking to establish an NGO, trust registration is one of the most common 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 gaining donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It forms the basis for the NGO’s activities and allows it to operate as a acknowledged entity under the law.
Summary

Registering an NGO under Section 12A and Section 80G is crucial for any organization looking to get tax exemptions and attract more donors. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is tax-free.

If you are considering to start an NGO or are an existing one looking to get these registrations, it’s advisable to get guidance from consultants in NGO consultancy to guide you through the process and make sure compliance with all requirements. These steps will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.