What is 12A Registration?

What is 12A Registration?

Blog Article

Understanding 12A Registration

Charitable organizations play a vital role in addressing numerous community challenges. To boost their efficiency, 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, which are essential for NGOs wanting financial support and credibility.
Understanding 12A Registration

12A of Income Tax Act is a important process for an NGO to gain recognition as a non-profit entity under Indian law. The registration enables the NGO to benefit from income tax exemptions on their income. This means that the income received by the organization will not be taxed, which in turn enables 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 obtaining 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 deed of trust or organization memorandum, PAN card, and details of activities.
Understanding 80G Registration



80G of Income Tax Act of the Income Tax Act permits 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 provide 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 nature of the NGO and the type of donation.
Why NGOs Need 80G Registration

Obtaining 80G registration is a major advantage for an trust registration NGO as it helps them to bring in more donors. When donors know they can receive tax exemptions 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 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 obtain large donations from corporate sectors and high-net-worth individuals.
80G Registration Requirements

To be eligible 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.
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 provide 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 valid for five years.
Tax Savings Under 80G

Section 80G of the Income Tax Act offers a system through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Individuals, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.

The eligible deduction is limited to a part 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 80g deduction 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 letting 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 guarantee 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 set up by executing a trust deed, which outlines the objectives and operational framework of the trust. This legal document is submitted to the registrar, making the organization an official entity capable of receiving donations and grants.

Trust registration is often the first step before getting 12A and 80G registration. It forms the basis for the NGO’s activities and enables it to operate as a legal entity under the law.
Final Thoughts

Becoming registered an NGO under Section 12A and Section 80G is crucial for any organization wanting 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 encouraged to contribute, knowing they can benefit from tax deductions, while 12A registration ensures that the NGO’s income is exempt from tax.

If you are planning to establish an NGO or are an existing one looking to benefit from these registrations, it’s advisable to consult with experts in NGO consultancy to guide you through the process and ensure compliance with all criteria. These actions will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.