Understanding 12A Registration
Understanding 12A Registration
Blog Article
Understanding 12A Registration
NGOs are important in solving many societal problems. To enhance their impact, many NGOs apply for registration under specific sections of the Income Tax Act to avail tax exemptions and benefits for donors. In this article, we will examine the advantages and procedures of getting registered under 80G registration and 12A registration, which are important for NGOs aiming for financial support and credibility.
What is 12A Registration?
12A of Income Tax Act is a crucial process for an NGO to get acknowledged as a charitable organization under Indian law. The approval allows the NGO to benefit from income tax exemptions on their income. This means that the income earned 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 gaining grants and donations from various sources.
To get 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or memorandum of association, PAN card, and details of activities.
Section 80G Explained
80G of Income Tax Act of the Income Tax Act allows donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section promotes individuals and corporations to contribute to charities, making it an key feature for NGOs seeking public funding. An NGO must obtain 80G registration to provide tax benefits to its donors.
The 80G deduction permits a percentage 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 change depending on the nature 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 allows them to bring in 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 increases its funding base, which is essential for fulfilling social goals.
Moreover, 80G registration is often necessary 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 qualify for 80G registration, an NGO must fulfill certain criteria:
Non-Profit Status: The NGO should not be conducting 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.
Legal Status: 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.
Section 80G of Income Tax Act: Tax Deduction for Donors
Income Tax Act 80G lays down provisions through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. Persons, companies, and other entities making donations 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 eligible for a 100% deduction.
Why 12A and 80G Matter for 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 encourages donors to contribute by allowing 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.
Consultancy for NGOs
For NGOs looking to handle the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services offer guidance 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 make sure that the application is processed smoothly and in a timely manner.
Trust Registration for NGOs
For organizations that are considering forming 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 defines 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 applying for 12A and 80G registration. It lays the groundwork for the NGO’s activities and enables it to operate as a recognized entity under the law.
Summary
Registering an NGO under Section 12A and Section 80G is crucial for any organization aiming to receive tax exemptions and gain more supporters. These registrations provide substantial benefits, 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 makes sure that the NGO’s income is not taxable.
If you are planning to start an NGO or are an already established one looking to benefit from these registrations, it’s recommended to get guidance from consultants in NGO consultancy to guide you through the process and make sure compliance with all criteria. These measures will not only enhance your NGO's credibility but also aid in growing your outreach and financial stability.