If an organization is registered as an NGO, it guarantees that its income is free from income tax. Donors of an NGO may be eligible for income tax exemption if the organization has received certification under section 80G of the Income Tax Act. As soon as the NGO is registered, an application for registration under sections 12A and 80G may be submitted.
Donors who register your NGO (Non-Governmental Organization) under 12A will be able to get tax advantages. Prior to offering services to non-profit entities like Charitable Trusts and NPOs (Non-Profit Organizations), this is the prerequisite that NGOs must fulfil. The organization and the contributors associated with it both gain from this tax exemption provision.
In India, non-profit organizations are essential to the country's social and economic advancement. Nevertheless, they lack a reliable source of income to produce their own profits. Their primary sources of funding include grants, donations, and other unrestricted contributions. These contributions enable them to continue operating and easily accomplish their goals. The government aims to promote such donations to nonprofit groups through the 12A and 80G Registrations.
NGOs can apply for 12A registration under Section 12A of the Income Tax Act of 1961. These organizations are granted tax exemption on revenue received from grants, gifts, and other types of unrestricted contributions. All non-governmental organizations that wish to take Section 12A's benefits must register for it.
NGOs must get 80G registration so that the donor can deduct the contributors amount from their gross income and avail tax exemption for the same. The goal of 80G registration is to promote increasing amounts of donations to NGOs in order to fund their charitable purposes. Only after completing the 12A registration process, the NGOs can go for this registration.
The advantages of obtaining the 12A and 80G Certificates are mentioned below:
An organization, such as a society or non-governmental organization, may apply for any type of government program or grant by obtaining the exemption certificate granted under Section 12A
The NGO or Society would not be required to pay taxes if they were to claim this exemption. To be eligible for this exemption, the NGO would need to provide the 12A certificate.
This kind of certificate would serve as the government's legitimate and written proof that this type of entity is registered. For the organization to be eligible for a government grant or loan, legal verification would be provided.
This type of certificate can also be used by societies that have complied with the Societies Registration Act's registration requirements.
The following are essential requirements that must be met in order to be registered under Section 12A:
The following are the essential requirements that must be met in order to be registered under Section 80G:
The list of documents required for 12A and 80G registration are as follows:
Here is a step-by-step to avail the 12A and 80G Registration:
Step 1: Registration and Formation of NGO
Choose a trust, society, or Section 8 corporation for your NGO's legal structure, taking into account the rules of your state. After deciding on your organization's legal structure, legally register it with the Registrar of Societies, Registrar of Companies, or any other applicable regulating agency.
Step 2: Gathering Documents
Gather the necessary paperwork to submit form 10A with your 12A and 80G registration forms. These records typically consist of the FCRA registration, NGO Darpan ID, audited financial statements, MOA, Bye Laws, Trust Deed, and registration certificate for your organization, among others. These records will demonstrate the validity and existence of your non-profit organization.
Step 3: Filling the Form
Fill out Form 10A, the official application to request registration under Income Tax Act Sections 12A and 80G. You may get this form at the local income tax office or from the official website of the Income Tax Department. When completing the form, make sure all the information is correct and complete, including facts on the goals, events, and members of the governing body of your organization.
Step 4: Submitting the Application
Send the completed Form 10A to the Income Tax Commissioner's office or through the Income Tax website together with the required paperwork. With this submission, your 12A/80G registration procedure officially begins. For your records, retain copies of every document you submit.
Step 5: Examine and Assess
The tax authority will examine your application when it is received to ensure that your NGO satisfies the requirements for Section 12A/80G registrations. To verify compliance and authenticity, they could occasionally audit the operations and financial records of your company.
Step 6: Registration or Revocation
One of two things will happen, depending on the results of the inspection and review. Your NGO registration under Section 12A/80G will be granted by the tax authority if your application is approved and fits the conditions. However, if any problems or inconsistencies arises, your application will be returned back and you can submit your reply accordingly.
Step 7: Notification of Registration
The tax authorities will issue an official registration certificate if your registration is approved. The Income Tax Act's Section 12A and 80G tax exemption for your NGO is verified by this certificate. It's an important document that proves the legality of your organization and enables you to claim tax exemptions for both your contributors and your non-profit organization.
The total fee for 12A and 80G registration is 1000 rupees. Once your application is submitted, it will be processed within 5-10 days. You can expect approval from the Jurisdictional Principal Commissioner within 20-30 days thereafter.
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The Income Tax Department recognizes non-governmental organizations such as Section 8 companies and charity trusts with the 80G Certificate. Its main goal is to provide tax incentives to contributors of these non-profit organizations.
As per the 12A registration, the NGO is exempt from tax for its lifetime. Moreover, making a gift to the NGO, the donor receives a 50% tax refund if it is registered under section 80g.
Contributions to any local government agency, association, or institution that has received approval from the government are fully deductible.
This temporary registration must be renewed either six months before its expiration or within six months of the start of its operations, whichever comes first. Five years will be provided for each of the renewed registrations.
A non-profit organization's future financial transactions and revenues will be considered taxable if they do not register under section 12A. Due to this, non-profit organizations must thoroughly familiarize themselves with the provisions of Section 12A of the Income Tax Act.