12A Registration Overview

Wiki Article

Understanding 12A Registration

NGOs are important in addressing various societal problems. To boost their effectiveness, 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 steps of registering under section 80g of income tax act and 12A, which are essential for NGOs wanting financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a important process for an NGO to get acknowledged as a charitable institution under Indian law. The registration permits 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 supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also boosts the credibility of an NGO and is often a necessary step for receiving 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 deed of trust or organization memorandum, PAN card, and details of activities.
What is Section 80G?



80G of the Income Tax Act enables donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section motivates individuals and corporations to contribute to charities, making it an important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction allows 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 type of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a significant advantage for an section 80g NGO as it enables them to gain more donors. When donors understand they can get tax benefits on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and grows its funding base, which is crucial for achieving 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 get large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

To qualify for 80G registration, an NGO must fulfill certain criteria:

Non-commercial Nature: The NGO should not be engaged in any commercial activities, and its primary objective must be charitable.
No Misuse of 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 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 applicable for five years.
How Donors Benefit from Section 80G

Income Tax Act 80G lays down provisions through which donors can receive 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 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 eligible for a 100% deduction.
Importance of 12A and 80G Registration for ngo consultancy NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration enables an NGO get 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.
Consultancy for NGOs

For NGOs looking to handle the registration processes and comply with tax regulations, engaging an NGO consultancy can be highly helpful. NGO consultancy services provide assistance 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 without hassle 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 widely used ways to form a non-profit entity. In India, a charitable trust is typically formed 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 getting 12A and 80G registration. It provides the foundation for the NGO’s activities and enables it to operate as a recognized entity under the law.
Summary

Becoming registered an NGO under Section 12A and Section 80G is important for any organization wanting tax exemptions and attract more donors. These registrations are highly beneficial, 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 guarantees that the NGO’s income is tax-free.

If you are considering to form an NGO or are an existing 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 criteria. These measures will not only enhance your NGO's credibility but also aid in growing your outreach and financial stability.