Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

Charitable organizations are important in addressing numerous community challenges. To boost their impact, many NGOs get registered under designated parts of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will look into the advantages and steps of registering under 80G registration and 12A, which are important for NGOs wanting financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a crucial process for an NGO to get acknowledged as a charitable organization under Indian law. The registration enables the NGO to obtain 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 increases the credibility of an NGO and is often a prerequisite for receiving 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.
What is Section 80G?



Section 80G of the Income Tax Act allows donors to claim deductions 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 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 type of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a major advantage for an ngo consultancy NGO as it enables them to attract more donors. When donors understand they can get tax benefits on their donations, they are more likely to contribute. This also improves the NGO’s reputation and increases 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.
80G Registration Requirements

To get 80G registration, an NGO must meet particular 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 involves 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 effective for five years.
How Donors Benefit from Section 80G

Section 80G provides a framework through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. People, companies, and other entities contributing to an 80G registered NGO can claim a deduction under Section 80G.

The eligible deduction is limited to a part 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 section 80g NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration enables an NGO claim exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by allowing 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.
NGO Consultancy Services

For NGOs looking to manage the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly beneficial. 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 guarantee 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 set up 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 applying for 12A and 80G registration. It lays the groundwork for the NGO’s activities and allows it to operate as a acknowledged entity under the law.
Final Thoughts

Registering an NGO under Section 12A and Section 80G is crucial for any organization wanting tax exemptions and attract more donors. 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 get tax relief, while 12A registration makes sure that the NGO’s income is exempt from tax.

If you are considering to establish an NGO or are an current one looking to benefit from these registrations, it’s recommended to consult with experts in NGO consultancy to assist you through the process and guarantee compliance with all regulations. These steps will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.