12A Registration Overview

12A Registration Overview

Blog Article

12A Registration Overview

NGOs play a vital role in tackling numerous social issues. To boost their effectiveness, many NGOs apply for registration under specific sections of the Income Tax Act to avail tax exemptions and incentives for contributors. In this article, we will explore the benefits and process of getting registered under section 80g of income tax act and 12A registration, which are essential for NGOs aiming for financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a important process for an NGO to get acknowledged as a charitable organization under Indian law. The approval 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 enhances the credibility of an NGO and is often a requirement for obtaining grants and donations from various sources.

To register 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 organization memorandum, PAN card, and details of activities.
What is Section 80G?



Section 80G of the Income Tax Act enables 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 important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.

The 80G deduction permits 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.
Why NGOs Need 80G Registration

Obtaining 80G registration is a significant advantage for an ngo consultancy NGO as it helps them to gain more donors. When donors realize 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 essential 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 obtain large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

To get 80G registration, an NGO must fulfill particular criteria:

Charitable Objective: 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.
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 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.
Tax Savings Under 80G

Section 80G of the Income Tax Act provides a framework 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 donating to an 80G registered NGO can receive tax 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.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps 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 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 adhere to tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services provide assistance 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 guarantee that the application is processed effectively 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 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 submitted to the registrar, making the organization an official entity capable of obtaining 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 permits it to operate as a legal entity under the law.
Summary

Registering an NGO under Section 12A and Section 80G is crucial for any organization looking to get 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 more likely to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is not taxable.

If you are looking to start an NGO or are an current 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 requirements. These measures will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.