What is 12A Registration?

What is 12A Registration?

Blog Article

Understanding 12A Registration

NGOs play a vital role in solving many social issues. To increase their impact, many NGOs apply for registration under specific sections of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will explore the pros and steps of registering under Section 80G and 12A registration, which are key for NGOs seeking financial support and credibility.
What is 12A Registration?

12A certificate is a crucial process for an NGO to be recognized as a charitable organization under Indian law. The process 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 enables 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 gaining 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 deed of trust or memorandum of association, PAN card, and details of activities.
Understanding 80G Registration



80G of the Income Tax Act enables donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section promotes individuals and corporations to contribute to charities, making it an important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction allows 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 differ depending on the category of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an section 80g NGO as it allows them to attract more donors. When donors understand they can get tax benefits on their donations, they are more likely to contribute. This also increases the NGO’s reputation and increases its funding base, which is essential for achieving social goals.

Moreover, 80G registration is often required 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.
How to Get 80G Registration

To be eligible for 80G registration, an NGO must fulfill certain criteria:

Charitable Objective: The NGO should not be engaged in 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 offers a system through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing 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 eligible for a 100% deduction.
Importance of 12A and 80G Registration for 80g registration NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration helps an NGO get 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 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 comply with tax regulations, engaging an NGO consultancy can be highly helpful. 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 without hassle 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 outlines the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of obtaining 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 important 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 more likely to contribute, knowing they can get tax relief, while 12A registration ensures that the NGO’s income is tax-free.

If you are looking to form an NGO or are an already established one looking to get these registrations, it’s suggested to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all criteria. These actions will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.