What is 12A Registration?

Non-Governmental Organizations are important in tackling various community challenges. To increase their effectiveness, many NGOs apply for registration under certain provisions of the Income Tax Act to obtain tax benefits and tax perks for supporters. In this article, we will explore the advantages and process of registering under section 80g of income tax act and 12A, which are essential for NGOs aiming for financial support and credibility.
12A Registration Overview

12A of Income Tax Act is a vital process for an NGO to get acknowledged as a charitable organization under Indian law. The approval permits 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 boosts 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 organization memorandum, PAN card, and details of activities.
Understanding 80G Registration



80G of Income Tax Act of the Income Tax Act enables donors to avail tax deductions on their taxable income against donations made to eligible NGOs. This section encourages individuals and corporations to contribute to charities, making it an key feature for NGOs seeking public funding. An NGO must obtain 80G registration to offer 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 differ 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 12a NGO as it enables them to gain more donors. When donors know they can claim tax deductions on their donations, they are more likely to contribute. This also increases the NGO’s reputation and grows its funding base, which is crucial for achieving 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.
80G Registration Requirements

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

Charitable Objective: The NGO should not be engaged 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.
Formal Setup: The NGO must be registered either as a trust, society, or Section 8 company.

The application for 80G registration needs the NGO to provide 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 valid for five years.
Tax Savings Under 80G

Income Tax Act 80G provides a framework through which donors can get deductions on their taxable income. This section is aimed at promoting charitable activities by incentivizing donations. People, companies, and other entities contributing to an 80G registered NGO can get tax relief 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 granted a 100% deduction.
Why 12A and 80G Matter for NGOs

Having both 12A and 80G registration is useful for NGOs. 12A registration allows an NGO claim 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.
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 provide assistance 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 ensure that the application is processed smoothly and in a timely manner.
Trust Registration for NGOs

For organizations that are planning to start 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 details 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 getting 12A and 80G registration. It forms the basis for the NGO’s activities and permits it to operate as a legal entity under the law.
Conclusion

Becoming registered an NGO under Section 12A and Section 80G is important for any organization aiming to receive 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 more likely to contribute, knowing they can enjoy tax benefits, while 12A registration ensures that the NGO’s income is not taxable.

If you are planning to establish an NGO or are an existing one looking to benefit from these registrations, it’s advisable to consult with experts in NGO consultancy to assist you through the process and guarantee compliance with all requirements. These actions will not only increase your NGO's credibility but also support the expansion of your outreach and financial stability.