12A Registration Overview

12A Registration Overview

Blog Article

Understanding 12A Registration

Non-Governmental Organizations are crucial in addressing numerous community challenges. To boost their effectiveness, many NGOs apply for registration under specific sections of the Income Tax Act to benefit from tax relief and incentives for contributors. In this article, we will look into the benefits and process of getting registered under 80G registration and 12A, which are essential for NGOs wanting financial support and credibility.
Understanding 12A Registration

12A of Income Tax Act is a important process for an NGO to gain recognition as a charitable organization under Indian law. The registration permits the NGO to avail 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 prerequisite for obtaining grants and donations from various sources.

To register for 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust 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 motivates 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 portion of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is granted. However, the deduction rate may change depending on the type of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a significant advantage for an section 80g NGO as it allows them to gain more donors. When donors know they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and grows its funding base, which is essential for achieving 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 obtain large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

Charitable Objective: The NGO should not be engaged 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.
Registration: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration needs the NGO to submit 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.
Tax Savings Under 80G

Income Tax Act 80G provides a framework through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. People, companies, and other entities donating 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.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables 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 boost the credibility of the NGO, allowing them to attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
How NGO Consultancy Can Help

For NGOs looking to navigate the registration processes and follow tax regulations, engaging an NGO consultancy can be highly advantageous. 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 guarantee that the application is processed without hassle and in a timely manner.
Trust Registration 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 registered 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 receiving donations and grants.

Trust registration is often the first step before obtaining 12A and 80G registration. It forms the basis for the NGO’s activities and allows it to operate as a acknowledged entity under the law.
Conclusion

Getting registered an NGO under Section 12A and Section 80G is essential for any organization looking to get tax exemptions and attract more donors. 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 enjoy tax benefits, while 12A registration ensures that the NGO’s income is not taxable.

If you are planning to start an NGO or are an already established one looking to get these registrations, it’s suggested to seek advice from professionals in NGO consultancy to help you through the process and ensure compliance with all regulations. These actions will not only enhance your NGO's credibility but also aid in growing your outreach and financial stability.