What is 12A Registration?
NGOs are important in tackling various societal problems. To enhance their efficiency, many NGOs seek registration under certain provisions of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will look into the advantages and steps of registering under 80G registration and 12A registration, which are key for NGOs aiming for financial support and credibility.
12A Registration Overview
12A of Income Tax Act is a important process for an NGO to get acknowledged as a non-profit entity under Indian law. The approval enables the NGO to obtain 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 enhances 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 submit an application to the jurisdictional Commissioner of Income Tax along with key documents, including the trust deed or MOA, PAN card, and details of activities.
Section 80G Explained
Section 80G of the Income Tax Act enables donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section promotes individuals and corporations to contribute to charities, making it an important aspect for NGOs seeking public funding. An NGO must obtain 80G registration to offer tax benefits to its donors.
The 80G deduction allows a percentage 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 differ depending on the type of the NGO and the type of donation.
Advantages of 80G
Obtaining 80G registration is a great advantage for an section 80g of income tax act NGO as it enables them to bring in more donors. When donors know they can get tax benefits on their donations, they are more likely to contribute. This also enhances the NGO’s reputation and grows its funding base, which is critical for achieving 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 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 specific criteria:
Charitable Objective: 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.
Registration: 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 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.
How Donors Benefit from Section 80G
Section 80G of the Income Tax Act provides a framework 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 eligible 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.
Importance of 12A and 80G Registration for ngo consultancy NGOs
Having both 12A and 80G registration is useful for NGOs. 12A registration helps an NGO avail exemptions on income, reducing their tax liability, while 80G registration motivates 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 follow tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services offer guidance on documentation, application procedures, and compliance with regulations related to trust registration, 80G, and 12A. These consultancies are knowledgeable in handling the complexities of registrations and can guarantee 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 common ways to form a non-profit entity. In India, a charitable trust is typically formed by executing a trust deed, which outlines the objectives and operational framework of the trust. This legal document is registered with the registrar, making the organization an official entity capable of gaining donations and grants.
Trust registration is often the first step before applying for 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 essential for any organization wanting tax exemptions and gain more supporters. These registrations are highly beneficial, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged to contribute, knowing they can benefit from tax deductions, while 12A registration guarantees that the NGO’s income is not taxable.
If you are looking to establish an NGO or are an already established one looking to take advantage of these registrations, it’s recommended to seek advice from professionals in NGO consultancy to guide you through the process and guarantee compliance with all regulations. These measures will not only enhance your NGO's credibility but also support the expansion of your outreach and financial stability.