What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Non-Governmental Organizations are crucial in addressing numerous societal problems. To boost their efficiency, many NGOs seek registration 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 benefits and procedures of getting registered under Section 80G and 12A registration, which are essential for NGOs wanting financial support and credibility.
What is 12A Registration?

12A registration is a important process for an NGO to gain recognition as a non-profit entity under Indian law. The process enables the NGO to avail 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 increases the credibility of an NGO and is often a prerequisite for gaining 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.
Understanding 80G Registration



Section 80G of the Income Tax Act allows donors to claim deductions on their taxable income against donations made to eligible NGOs. This section encourages individuals and corporations to contribute to charities, making it an essential tool for NGOs seeking public funding. An NGO must obtain 80G registration to provide tax benefits to its donors.

The 80G deduction permits a portion 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 granted. However, the deduction rate may differ depending on the category of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a great advantage for an ngo consultancy NGO as it allows them to attract more donors. When donors understand they can get tax benefits 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 meeting 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.
Eligibility and Process for 80G Registration

To be eligible for 80G registration, an NGO must fulfill specific criteria:

Non-commercial Nature: The NGO should not be involved 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.
Legal Status: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration requires 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.
How Donors Benefit from Section 80G

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

The deduction amount 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 granted a 100% deduction.
Why 12A and 80G Matter for 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 helps donors to contribute by allowing them claim 80G deductions on their donations. These registrations enhance the credibility of the NGO, allowing them to gain financial support from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
How NGO Consultancy Can Help

For NGOs looking to manage 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 experienced in handling the complexities of registrations and can guarantee that the application is processed smoothly 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 formed by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is filed with the registrar, making the organization an official entity capable of gaining donations and grants.

Trust registration is often the first step before obtaining 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.
Summary

Registering an NGO under Section 12A and Section 80G is essential 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 tax-free.

If you are planning to form an NGO or are an current one looking to benefit from these registrations, it’s suggested to seek advice from professionals in NGO consultancy to guide you through the process and make sure compliance with all requirements. These actions will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.