What is 12A Registration?

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What is 12A Registration?

NGOs play a vital role in addressing many societal problems. To boost their effectiveness, many NGOs seek registration under certain provisions of the Income Tax Act to avail tax exemptions and tax perks for supporters. In this article, we will look into the benefits and process of registering under Section 80G and 12A, which are essential for NGOs seeking financial support and credibility.
12A Registration Overview

12A certificate is a crucial process for an NGO to get acknowledged as a charitable institution under Indian law. The approval enables the NGO to benefit from income tax exemptions on their income. This means that the income generated 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 requirement 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.
Section 80G Explained



Section 80G of the Income Tax Act enables donors to claim deductions on their taxable income against donations made to eligible NGOs. This section promotes individuals and corporations to contribute to charities, making it an essential tool 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 granted. However, the deduction rate may vary 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 attract more donors. When donors realize they can get tax benefits 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 get large donations from corporate sectors and high-net-worth individuals.
Eligibility and Process for 80G Registration

To qualify for 80G registration, an NGO must fulfill certain criteria:

Charitable Objective: 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.
Legal Status: 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 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.
Section 80G of Income Tax Act: Tax Deduction for Donors

Section 80G of the Income Tax Act provides a framework through which donors can receive deductions on their taxable income. This section is aimed at promoting charitable activities by encouraging donations. People, companies, and other entities donating to an 80G registered NGO can receive tax deduction under Section 80G.

The tax deduction is limited to a certain percentage 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 enables 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 increase the credibility of the NGO, allowing them to receive funds from multiple sources, including government schemes and corporate social responsibility (CSR) initiatives.
NGO Consultancy Services

For NGOs looking to manage the registration processes and follow tax regulations, engaging an NGO consultancy can be highly beneficial. NGO consultancy services help with 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.
Setting Up a Trust for NGOs

For organizations that are looking to establish an NGO, trust registration is one of the most popular ways to form a non-profit entity. In India, a charitable trust is typically formed by executing a trust deed, which defines the objectives and operational framework of the trust. This legal document is filed with the registrar, making the organization an official entity capable of receiving donations and grants.

Trust registration is often the first step before obtaining 12A and 80G registration. It lays the groundwork for the NGO’s activities and enables it to operate as a legal entity under the law.
Final Thoughts

Registering an NGO under Section 12A and Section 80G is essential for any organization wanting tax exemptions and gain more supporters. These registrations offer major advantages, both for the NGO and for the individuals or corporations supporting the cause. With 80G registration, donors are encouraged to contribute, knowing they can enjoy tax benefits, while 12A registration ensures that the NGO’s income is tax-free.

If you are looking to form an NGO or are an current one looking to take advantage of these registrations, it’s recommended to get guidance from consultants in NGO consultancy to guide you through the process and ensure compliance with all requirements. These actions will not only boost your NGO's credibility but also support the expansion of your outreach and financial stability.