What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Charitable organizations play a vital role in tackling many community challenges. To increase their effectiveness, many NGOs apply for registration under certain provisions of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will explore the benefits and steps of registering under 80G registration and 12A registration, which are important for NGOs aiming for financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a vital process for an NGO to be recognized as a charitable institution under Indian law. The approval permits 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 helps the organization in utilizing more resources for charitable activities. Obtaining 12A registration also enhances the credibility of an NGO and is often a necessary step for receiving grants and donations from various sources.

To get 12A registration, the NGO must file 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.
What is Section 80G?



80G of Income Tax Act 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 provide tax benefits to its donors.

The 80G deduction allows a fraction of the donation to be written off from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is permitted. However, the deduction rate may differ depending on the category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a great advantage for an section 80g NGO as it allows them to gain 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 boosts its funding base, which is critical for fulfilling social goals.

Moreover, 80G registration is often demanded 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 get 80G registration, an NGO must satisfy specific 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.
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 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.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G of the Income Tax Act lays down provisions through which donors can benefit from 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 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 eligible for a 100% deduction.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables an NGO claim exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by enabling them claim 80G deductions on their donations. These registrations enhance 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 navigate the registration processes and comply with 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 skilled in handling the complexities of registrations and can ensure that the application is processed smoothly and in a timely manner.
How to Register a Trust

For organizations that are considering forming 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 set up by executing a trust deed, which details the objectives and operational framework of the trust. This legal document is registered 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 recognized entity under the law.
Final Thoughts

Becoming registered an NGO under Section 12A and Section 80G is crucial for any organization looking to get tax exemptions and increase donations. These registrations provide substantial benefits, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged to contribute, knowing they can enjoy tax benefits, while 12A registration guarantees that the NGO’s income is exempt from tax.

If you are considering to start an NGO or are an existing one looking to take advantage of these registrations, it’s recommended to consult with experts in NGO consultancy to assist you through the process and ensure compliance with all regulations. These measures will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.