What is 12A Registration?

What is 12A Registration?

Blog Article

12A Registration Overview

Charitable organizations are important in tackling numerous community challenges. To boost their impact, many NGOs seek registration under designated parts of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will look into the pros and process of registering under Section 80G and 12A registration, which are key for NGOs aiming for financial support and credibility.
12A Registration Overview

12A certificate is a important process for an NGO to be recognized as a charitable organization under Indian law. The registration permits 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 enables 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 get 12A registration, the NGO must provide an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or MOA, PAN card, and details of activities.
Section 80G Explained



80G 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 key feature for NGOs seeking public funding. An NGO must obtain 80G registration to grant 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 allowed. However, the deduction rate may vary depending on the category of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a significant advantage for an 12a registration NGO as it helps them to gain more donors. When donors understand they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is critical 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 get 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 meet certain criteria:

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

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

Section 80G offers a system through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. People, companies, and other entities contributing to an 80G registered NGO can receive tax deduction under Section 80G.

The deduction amount 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 trust registration NGOs

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps 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 follow tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services help with on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are knowledgeable in handling the complexities of registrations and can make sure that the application is processed without hassle and in a timely manner.
How to Register a Trust

For organizations that are looking to establish an NGO, trust registration is one of the most common 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 receiving 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 enables it to operate as a legal entity under the law.
Conclusion

Becoming registered an NGO under Section 12A and Section 80G is important for any organization aiming to receive tax exemptions and gain more supporters. These registrations offer major advantages, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is tax-free.

If you are considering to start an NGO or are an existing one looking to take advantage of these registrations, it’s suggested to get guidance from consultants in NGO consultancy to help you through the process and guarantee compliance with all criteria. These actions will not only boost your NGO's credibility but also aid in growing your outreach and financial stability.