What is 12A Registration?

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Understanding 12A Registration

NGOs play a vital role in tackling numerous societal problems. To increase their effectiveness, many NGOs apply for registration under designated parts of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will explore the benefits and steps of getting registered under section 80g of income tax act and 12A, which are key for NGOs wanting financial support and credibility.
What is 12A Registration?

12A of Income Tax Act is a vital process for an NGO to gain recognition as a charitable institution under Indian law. The registration permits the NGO to avail 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 boosts the credibility of an NGO and is often a requirement for gaining grants and donations from various sources.

To register for 12A registration, the NGO must file an application to the jurisdictional Commissioner of Income Tax along with key documents, including the legal trust document or MOA, PAN card, and details of activities.
Section 80G Explained



80G of the Income Tax Act enables donors to avail tax 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 provide tax benefits to its donors.

The 80G deduction provides for 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 allowed. 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 80g NGO as it helps them to bring in more donors. When donors realize 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 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.
Eligibility and Process for 80G Registration

To get 80G registration, an NGO must meet certain criteria:

Non-commercial Nature: The NGO should not be engaged in 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.
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 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 effective for five years.
Tax Savings Under 80G

Section 80G of the Income Tax Act lays down provisions 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 contributing 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 allowed a 100% deduction.
Benefits of Both 12A and 80G

Having both 12A and 80G registration is advantageous for NGOs. 12A registration helps 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 boost 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 follow 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 knowledgeable 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 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 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 receiving donations and grants.

Trust registration is often the first step before obtaining 12A and 80G registration. It forms the basis for the NGO’s activities and allows it to operate as a acknowledged entity under the law.
Summary

Getting registered an NGO under Section 12A and Section 80G is essential for any organization wanting tax exemptions and increase donations. 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 get tax relief, while 12A registration ensures that the NGO’s income is not taxable.

If you are planning to form an NGO or are an current one looking to take advantage of these registrations, it’s recommended to consult with experts in NGO consultancy to assist you through the process and make sure compliance with all requirements. These steps will not only increase your NGO's credibility but also aid in growing your outreach and financial stability.