What is 12A Registration?
What is 12A Registration?
Blog Article
What is 12A Registration?
Charitable organizations are crucial in addressing many community challenges. To boost their impact, many NGOs get registered under specific sections of the Income Tax Act to obtain tax benefits and benefits for donors. In this article, we will look into the advantages and steps of registering under section 80g of income tax act and 12A, which are important for NGOs seeking financial support and credibility.
Understanding 12A Registration
12A of Income Tax Act is a important process for an NGO to get acknowledged as a non-profit entity under Indian law. The process permits the NGO to benefit from income tax exemptions on their income. This means that the income earned by the organization will not be taxed, which in turn supports 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 receiving grants and donations from various sources.
To register for 12A registration, the NGO must submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the deed of trust or memorandum of association, PAN card, and details of activities.
What is Section 80G?
Section 80G of the Income Tax Act enables donors to get tax benefits on their taxable income against donations made to eligible NGOs. This section encourages individuals and corporations to contribute to charities, making it an important aspect 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 reduced 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 type of the NGO and the type of donation.
Advantages of 80G
Obtaining 80G registration is a significant advantage for an 80g registration NGO as it enables them to attract more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is essential 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 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 satisfy certain criteria:
Non-commercial Nature: 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.
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 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 provides a framework 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 making donations to an 80G registered NGO can receive tax deduction under Section 80G.
The tax deduction 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 eligible for a 100% deduction.
Importance of 12A and 80G Registration for ngo registration NGOs
Having both 12A and 80G registration is beneficial for NGOs. 12A registration helps 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 attract funding from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
Consultancy for NGOs
For NGOs looking to handle the registration processes and follow 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 experienced in handling the complexities of registrations and can ensure that the application is processed without hassle 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 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 permits it to operate as a acknowledged entity under the law.
Summary
Becoming registered an NGO under Section 12A and Section 80G is crucial 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 ensures that the NGO’s income is exempt from tax.
If you are planning to form an NGO or are an already established 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 regulations. These steps will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.