Understanding 12A Registration

Understanding 12A Registration

Blog Article

12A Registration Overview

Non-Governmental Organizations play a vital role in addressing many societal problems. To enhance their effectiveness, many NGOs get registered under certain provisions of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will examine the pros and procedures of registering under 80G registration and 12A registration, which are key for NGOs wanting financial support and credibility.
Understanding 12A Registration

12A certificate is a crucial process for an NGO to get acknowledged as a non-profit entity under Indian law. The approval allows the NGO to obtain income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a requirement for receiving grants and donations from various sources.

To apply for 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the trust deed or memorandum of association, PAN card, and details of activities.
Section 80G Explained



80G of Income Tax Act of the Income Tax Act enables donors to avail tax 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 offer tax benefits to its donors.

The 80G deduction allows a fraction of the donation to be deducted from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is allowed. However, the deduction rate may vary depending on the nature of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an 80g deduction NGO as it allows them to bring in more donors. When donors realize they can get tax benefits on their donations, they are more likely to contribute. This also increases the NGO’s reputation and increases its funding base, which is essential for meeting 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 obtain large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

Charitable Objective: 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.
Formal Setup: The NGO must be registered either as a trust, society, or Section 8 company.

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

Income Tax Act 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. Persons, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.

The deduction amount 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 granted a 100% deduction.
Importance of 12A and 80G Registration for section 80g NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration allows an NGO avail exemptions on income, reducing their tax liability, while 80G registration motivates donors to contribute by enabling them claim 80G deductions on their donations. These registrations increase the credibility of the NGO, allowing them to attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to handle the registration processes and follow 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.
Setting Up a Trust for NGOs

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 registered by executing a trust deed, which outlines 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 provides the foundation for the NGO’s activities and enables it to operate as a acknowledged entity under the law.
Conclusion

Registering an NGO under Section 12A and Section 80G is essential for any organization aiming to receive tax exemptions and gain more supporters. 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 get tax relief, while 12A registration ensures that the NGO’s income is not taxable.

If you are looking to establish an NGO or are an already established one looking to get these registrations, it’s advisable to seek advice from professionals in NGO consultancy to assist you through the process and make sure compliance with all criteria. These measures will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.