What is 12A Registration?
What is 12A Registration?
Blog Article
What is 12A Registration?
NGOs are important in solving various social issues. To enhance their effectiveness, many NGOs seek registration under certain provisions of the Income Tax Act to benefit from tax relief and tax perks for supporters. In this article, we will examine the pros and steps of registering under 80G registration and 12A, which are key for NGOs seeking financial support and credibility.
Understanding 12A Registration
12A registration is a vital process for an NGO to get acknowledged as a non-profit entity under Indian law. The process allows the NGO to benefit from 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 boosts the credibility of an NGO and is often a prerequisite for receiving 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 trust deed or memorandum of association, PAN card, and details of activities.
Understanding 80G Registration
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 allows 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 change depending on the nature of the NGO and the type of donation.
Advantages of 80G
Obtaining 80G registration is a great advantage for an 80g registration NGO as it helps them to attract more donors. When donors understand they can claim tax deductions on their donations, they are more likely to contribute. This also improves the NGO’s reputation and grows its funding base, which is essential for meeting social goals.
Moreover, 80G registration is often demanded 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 get 80G registration, an NGO must meet certain criteria:
Non-commercial Nature: The NGO should not be conducting 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.
Legal Status: The NGO must be registered either as a trust, society, or Section 8 company.
The application for 80G registration involves 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 valid for five years.
How Donors Benefit from Section 80G
Income Tax Act 80G provides a framework through which donors can benefit from deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. Persons, companies, and other entities donating to an 80G registered NGO can claim a deduction under Section 80G.
The deduction amount 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.
Importance of 12A and 80G Registration for trust registration NGOs
Having both 12A and 80G registration is beneficial for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration encourages donors to contribute by letting them claim 80G deductions on their donations. These registrations enhance the credibility of the NGO, allowing them to gain financial support from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
How NGO Consultancy Can Help
For NGOs looking to navigate the registration processes and adhere to 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 make sure that the application is processed effectively and in a timely manner.
How to Register a Trust
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 set up by executing a trust deed, which outlines the objectives and operational framework of the trust. This legal document is filed with the registrar, making the organization an official entity capable of obtaining donations and grants.
Trust registration is often the first step before applying for 12A and 80G registration. It forms the basis for the NGO’s activities and permits it to operate as a recognized entity under the law.
Summary
Becoming registered an NGO under Section 12A and Section 80G is essential for any organization looking to get tax exemptions and gain more supporters. 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 enjoy tax benefits, while 12A registration ensures that the NGO’s income is exempt from tax.
If you are looking to form an NGO or are an already established one looking to benefit from these registrations, it’s advisable to seek advice from professionals in NGO consultancy to help you through the process and guarantee compliance with all requirements. These steps will not only enhance your NGO's credibility but also aid in growing your outreach and financial stability.