Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

NGOs are important in tackling numerous social issues. To boost their effectiveness, many NGOs seek registration under designated parts of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will examine the advantages and procedures of registering under section 80g of income tax act and 12A, which are key for NGOs wanting financial support and credibility.
12A Registration Overview

12A registration is a crucial process for an NGO to be recognized as a non-profit entity under Indian law. The approval allows 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 helps 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 obtaining grants and donations from various sources.

To apply for 12A registration, the NGO must submit 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.
Section 80G Explained



80G of Income Tax Act of the Income Tax Act permits donors to claim 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 offer tax benefits to its donors.

The 80G deduction permits a percentage of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is allowed. However, the deduction rate may vary depending on the nature of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a major advantage for an trust registration NGO as it helps them to gain more donors. When donors understand they can get tax benefits 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 meeting 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 receive large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

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

Non-Profit Status: The NGO should not be conducting 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 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 valid for five years.
Tax Savings Under 80G

Section 80G provides a framework through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Persons, companies, and other entities donating to an 80G registered NGO can receive tax deduction under Section 80G.

The eligible deduction is limited to a certain percentage 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 ngo consultancy NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration enables an NGO claim 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 increase the credibility of the NGO, allowing them to attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

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

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 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 provides the foundation for the NGO’s activities and allows it to operate as a legal entity under the law.
Final Thoughts

Registering an NGO under Section 12A and Section 80G is essential for any organization looking to get tax exemptions and gain more supporters. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged to contribute, knowing they can get tax relief, while 12A registration makes sure that the NGO’s income is not taxable.

If you are considering to establish an NGO or are an existing one looking to benefit from these registrations, it’s recommended to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all requirements. These measures will not only enhance your NGO's credibility but also help in expanding your outreach and financial stability.