What is 12A Registration?

What is 12A Registration?

Blog Article

What is 12A Registration?

Non-Governmental Organizations are crucial in addressing numerous societal problems. To enhance their impact, many NGOs get registered under certain provisions of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will look into the benefits and steps of registering under section 80g of income tax act and 12A, which are essential for NGOs seeking financial support and credibility.
12A Registration Overview

12A registration is a vital process for an NGO to gain recognition as a charitable organization under Indian law. The registration 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 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 gaining grants and donations from various sources.

To apply for 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 the Income Tax Act permits donors to claim deductions on their taxable income against donations made to eligible NGOs. This section promotes 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 provides for a percentage 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 vary depending on the type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a major advantage for an ngo registration NGO as it enables them to attract more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is essential for fulfilling 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 particular 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 needs the NGO to submit 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 effective for five years.
How Donors Benefit from Section 80G

Section 80G lays down provisions through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Individuals, companies, and other entities contributing 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 allowed a 100% deduction.
Importance of 12A and 80G Registration for section 80g NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration allows an NGO get 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 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 follow tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services offer guidance 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 make sure that the application is processed effectively and in a timely manner.
How to Register a Trust

For organizations that are planning to start an NGO, trust registration is one of the most popular 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 submitted to the registrar, making the organization an official entity capable of gaining donations and grants.

Trust registration is often the first step before applying for 12A and 80G registration. It forms the basis for the NGO’s activities and permits it to operate as a legal entity under the law.
Final Thoughts

Registering an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive tax exemptions and increase donations. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can enjoy tax benefits, while 12A registration ensures that the NGO’s income is tax-free.

If you are considering to establish an NGO or are an current one looking to get these registrations, it’s suggested to consult with experts in NGO consultancy to assist you through the process and guarantee compliance with all regulations. These actions will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.