What is 12A Registration?
Non-Governmental Organizations play a vital role in addressing numerous societal problems. To increase their impact, many NGOs apply for registration under specific sections of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will explore the benefits and procedures of getting registered under section 80g of income tax act and 12A, which are key for NGOs aiming for financial support and credibility.
12A Registration Overview
12A of Income Tax Act is a crucial process for an NGO to gain recognition as a charitable organization under Indian law. The registration allows the NGO to avail 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 enhances the credibility of an NGO and is often a necessary step for gaining grants and donations from various sources.
To apply 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.
Understanding 80G Registration
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 encourages individuals and corporations to contribute to charities, making it an key feature 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 allowed. 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 ngo consultancy NGO as it allows them to gain more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows its funding base, which is critical for achieving 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 get large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration
To qualify for 80G registration, an NGO must satisfy particular criteria:
Non-Profit Status: The NGO should not be engaged 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 needs 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.
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. People, companies, and other entities donating to an 80G registered NGO can get tax relief under Section 80G.
The tax 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.
Why 12A and 80G Matter for NGOs
Having both 12A and 80G registration is beneficial for NGOs. 12A registration allows an NGO get exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by enabling them claim 80G deductions on their donations. These registrations enhance 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 helpful. NGO consultancy services provide assistance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are experienced in handling the complexities of registrations and can guarantee 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 popular ways to form a non-profit entity. In India, a charitable trust is typically registered 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 legal entity under the law.
Final Thoughts
Registering an NGO under Section 12A and Section 80G is important for any organization wanting tax exemptions and attract more donors. These registrations provide substantial benefits, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are motivated to contribute, knowing they can get tax relief, while 12A registration makes sure that the NGO’s income is exempt from tax.
If you are planning to form an NGO or are an existing one looking to take advantage of these registrations, it’s advisable to seek advice from professionals in NGO consultancy to assist you through the process and guarantee compliance with all regulations. These steps will not only increase your NGO's credibility but also help in expanding your outreach and financial stability.