What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

NGOs play a vital role in solving various community challenges. To enhance their efficiency, many NGOs seek registration under certain provisions of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will explore the advantages and process of registering under 80G registration and 12A registration, which are key for NGOs wanting financial support and credibility.
12A Registration Overview

12A registration is a important process for an NGO to get acknowledged as a charitable organization under Indian law. The registration enables the NGO to avail 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 enhances the credibility of an NGO and is often a requirement for obtaining grants and donations from various sources.

To get 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.
Understanding 80G Registration



80G of Income Tax Act of the Income Tax Act allows 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 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 fraction of the donation to be reduced 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 category of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a major advantage for an 80g NGO as it helps them to gain more donors. When donors realize they can receive tax exemptions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and boosts its funding base, which is critical 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 obtain large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

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

Non-Profit Status: The NGO should not be involved 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.
Formal Setup: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration needs the NGO to provide 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.
How Donors Benefit from Section 80G

Section 80G of the Income Tax Act offers a system through which donors can get 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 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 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 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 advantageous. NGO consultancy services help with 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 make sure that the application is processed effectively and in a timely manner.
Trust Registration for NGOs

For organizations that are looking to establish 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 registered by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is registered with the registrar, making the organization an official entity capable of receiving donations and grants.

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

Getting registered an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive tax exemptions and attract more donors. 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 enjoy tax benefits, while 12A registration ensures that the NGO’s income is exempt from tax.

If you are looking to start an NGO or are an already established one looking to take advantage of these registrations, it’s suggested to consult with experts in NGO consultancy to guide you through the process and ensure compliance with all regulations. These steps will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.