Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

Charitable organizations are important in solving many social issues. To increase their impact, many NGOs apply for registration under certain provisions of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will explore the advantages and steps of getting registered under section 80g of income tax act and 12A, which are important for NGOs seeking financial support and credibility.
12A Registration Overview

12A registration is a important process for an NGO to get acknowledged as a non-profit entity under Indian law. The approval allows the NGO to benefit from income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn helps 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 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.
What is Section 80G?



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 grant tax benefits to its donors.

The 80G deduction permits a fraction 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 vary depending on the category of the NGO and the type of donation.
Advantages of 80G

Obtaining 80G registration is a significant advantage for an ngo consultancy NGO as it allows them to gain more donors. When donors understand they can claim tax deductions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and boosts 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 receive large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

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

Non-Profit Status: 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.
Formal Setup: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration involves 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 effective for five years.
How Donors Benefit from Section 80G

Section 80G provides a framework through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. People, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.

The tax deduction 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 beneficial for NGOs. 12A registration allows an NGO claim 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 boost the credibility of the NGO, allowing them to receive funds 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 beneficial. NGO consultancy services provide assistance 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.
How to Register a Trust

For organizations that are looking to establish 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 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 receiving donations and grants.

Trust registration is often the first step before applying for 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.
Final Thoughts

Becoming registered an NGO under Section 12A and Section 80G is important for any organization aiming to receive 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 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 planning to start an NGO or are an already established one looking to benefit from these registrations, it’s suggested to seek advice from professionals in NGO consultancy to help you through the process and ensure compliance with all criteria. These measures will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.