Understanding 12A Registration

Understanding 12A Registration

Blog Article

What is 12A Registration?

Charitable organizations are important in tackling many social issues. To increase their impact, many NGOs apply for registration under specific sections of the Income Tax Act to benefit from tax relief and benefits for donors. In this article, we will explore the benefits and procedures of registering under 80G registration and 12A registration, which are essential for NGOs seeking financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a crucial process for an NGO to be recognized as a non-profit entity under Indian law. The process enables the NGO to benefit from income tax exemptions on their income. This means that the income earned 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 prerequisite for receiving 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 legal trust document or organization memorandum, PAN card, and details of activities.
What is Section 80G?



Section 80G of the Income Tax Act allows donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section encourages individuals and corporations to contribute to charities, making it an key feature for NGOs seeking public funding. An NGO must obtain 80G registration to grant 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 granted. However, the deduction rate may differ depending on the nature of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a great advantage for an 12a NGO as it enables them to gain more donors. When donors understand they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and boosts its funding base, which is essential for meeting 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.
How to Get 80G Registration

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

Non-commercial Nature: The NGO should not be involved 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.
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 provide 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

Income Tax Act 80G lays down provisions through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Individuals, companies, and other entities donating to an 80G registered NGO can get tax relief 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 allowed a 100% deduction.
Importance of 12A and 80G Registration for section 80g NGOs

Having both 12A and 80G registration is beneficial 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 gain financial support from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
Consultancy for NGOs

For NGOs looking to navigate the registration processes and follow tax regulations, engaging an NGO consultancy can be highly beneficial. 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 ensure that the application is processed effectively and in a timely manner.
Setting Up a Trust for NGOs

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 filed with the registrar, making the organization an official entity capable of obtaining 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 allows it to operate as a legal entity under the law.
Final Thoughts

Becoming registered an NGO under Section 12A and Section 80G is crucial 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 encouraged to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is exempt from tax.

If you are considering 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 guide you through the process and guarantee compliance with all regulations. These steps will not only boost your NGO's credibility but also help in expanding your outreach and financial stability.