Understanding 12A Registration

Understanding 12A Registration

Blog Article

Understanding 12A Registration

NGOs are important in tackling 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 tax perks for supporters. 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.
What is 12A Registration?

12A registration is a vital process for an NGO to be recognized as a charitable institution under Indian law. The approval permits the NGO to obtain income tax exemptions on their income. This means that the income generated by the organization will not be taxed, which in turn supports the organization in utilizing more resources for charitable activities. Obtaining 12A registration also increases the credibility of an NGO and is often a requirement for obtaining grants and donations from various sources.

To get 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 memorandum of association, PAN card, and details of activities.
Section 80G Explained



Section 80G of the Income Tax Act permits donors to claim deductions on their taxable income against donations made to eligible NGOs. This section promotes 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 deducted 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 type of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a significant advantage for an section 80g NGO as it allows them to gain more donors. When donors know they can receive tax exemptions on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and increases its funding base, which is crucial for fulfilling 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.
Eligibility and Process for 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 requires the NGO to provide 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 applicable for five years.
Tax Savings Under 80G

Section 80G of the Income Tax Act lays down provisions through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by motivating donations. Persons, companies, and other entities contributing to an 80G registered NGO can claim a deduction under Section 80G.

The deduction amount is limited to a certain percentage 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 12a NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables an NGO avail 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 enhance the credibility of the NGO, allowing them to attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
How NGO Consultancy Can Help

For NGOs looking to handle the registration processes and adhere to tax regulations, engaging an NGO consultancy can be highly advantageous. NGO consultancy services offer guidance 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 ensure that the application is processed smoothly and in a timely manner.
Setting Up a Trust for NGOs

For organizations that are considering forming 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 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 allows 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 get tax relief, while 12A registration ensures that the NGO’s income is not taxable.

If you are looking to establish an NGO or are an existing one looking to take advantage of these registrations, it’s recommended to consult with experts in NGO consultancy to help you through the process and make sure compliance with all requirements. These actions will not only boost your NGO's credibility but also help in expanding your outreach and financial stability.