What is 12A Registration?

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Understanding 12A Registration

NGOs are important in addressing various societal problems. To boost their impact, many NGOs seek registration under specific sections of the Income Tax Act to benefit from tax relief and incentives for contributors. In this article, we will look into the advantages and procedures of registering under Section 80G and 12A registration, which are important for NGOs wanting financial support and credibility.
What is 12A Registration?

12A registration is a important process for an NGO to gain recognition as a charitable institution under Indian law. The process enables the NGO to avail income tax exemptions on their income. This means that the income earned 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 prerequisite for gaining grants and donations from various sources.

To apply for 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the trust deed or memorandum of association, PAN card, and details of activities.
Section 80G Explained



80G of the Income Tax Act allows donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section motivates 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 written off from the donor's taxable income. In most cases, a deduction of 50% of the donated amount is permitted. However, the deduction rate may vary depending on the category of the NGO and the type of donation.
Benefits of 80G Registration for NGOs

Obtaining 80G registration is a great advantage for an 80g registration NGO as it allows them to gain more donors. When donors understand 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 critical for achieving 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 obtain large donations from corporate sectors and high-net-worth individuals.
How to Get 80G Registration

To be eligible for 80G registration, an NGO must meet specific criteria:

Non-Profit Status: The NGO should not be involved in any commercial activities, and its primary objective must be charitable.
No Misuse of 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 requires 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 applicable for five years.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G offers a system through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Individuals, companies, and other entities making donations 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 granted a 100% deduction.
Importance of 12A and 80G Registration for section 80g of income tax act NGOs

Having both 12A and 80G registration is beneficial for NGOs. 12A registration enables an NGO get 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 manage 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 guarantee that the application is processed without hassle and in a timely manner.
How to Register a Trust

For organizations that are planning to start 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 getting 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

Getting registered an NGO under Section 12A and Section 80G is important for any organization aiming to receive 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 tax-free.

If you are planning to start an NGO or are an existing one looking to get these registrations, it’s advisable to seek advice from professionals in NGO consultancy to assist you through the process and ensure compliance with all criteria. These steps will not only boost your NGO's credibility but also help in expanding your outreach and financial stability.