12A and 80G Registration -Process and Procedure

Non-Governmental Organizations (NGOs) and charitable trusts play a pivotal role in addressing various social and welfare issues in India. To facilitate their work and encourage , the Indian government has established Sections 12A and 80G of the Income Tax Act, 1961. These provisions provide significant benefits for these organisations and donors, ensuring the efficient flow of resources for charitable activities.

12A Registration:

12A Registration is essentially a certification granted to charitable trusts, NGOs, and Section 8 companies in India. This registration allows these organizations to be exempted from paying income tax for the entirety of their lifetime.

Benefits Of 12A Registration:

•Tax Exemption:

The primary and most significant advantage of 12A registration is the tax exemption on the surplus income of the trust or NGO. Once registered, the organization is not required to pay tax on the surplus income or funds generated through its charitable or non-profit activities.

•Eligibility for Grants:

Many governmental and non-governmental agencies prefer or mandate 12A registration before sanctioning funds or grants to an organization. Thus, a 12A registered entity is in a better position to receive financial assistance.

•Enhanced Trustworthiness:

Holding a 12A registration can enhance the trustworthiness and credibility of the NGO or trust among donors and the public.

•Perpetual Existence:

Once granted, the 12A registration typically has perpetual existence, meaning it remains valid indefinitely. This continued validity ensures long-term benefits, provided the organization remains compliant with the provisions.

•Facilitates 80G Registration:

Organizations registered under Section 12A can easily apply for and obtain registration under Section 80G, which provides tax benefits to the donors.

•Legal Safeguard:

Being registered provides a legal safeguard against any potential scrutiny by the Income Tax department, as the organization's sources and application of income are transparent and accounted for.

80G Registration:

The 80G certification is a recognition provided to charitable organizations, allowing their donors to claim tax deductions. When an individual or a company donates to an 80G certified NGO, they can claim deductions on their taxable income.

Benefits Of 80G Registration:

•Tax Deductions for Donors:

The primary benefit of 80G is for the donors. Individuals or companies making a donation to an 80G-registered NGO or trust can avail tax deductions, thus reducing their taxable income.

•Encourages Larger Donations:

Knowing that a part of their donation will be eligible for a tax rebate, potential donors might be incentivized to donate more generously.

•Enhanced Credibility:

For an NGO or charitable trust, having an 80G certification boosts its credibility. It demonstrates compliance with government regulations, thereby making the organization more trustworthy in the eyes of the public and potential donors.

•Attracts Corporate Donors:

Many corporations have Corporate Social Responsibility (CSR) initiatives. An 80G certification makes the NGO or trust more attractive for corporate donations, as it can reduce the company's taxable income.

•Increased Visibility & Goodwill:

Organizations that can offer tax benefits to donors often get better visibility, both in terms of media coverage and in public recognition, leading to increased goodwill.

•Broader Donor Base:

The tax-saving incentive can bring in a broader spectrum of donors, from individuals to big corporations, expanding the donor base of the NGO or trust.

•Facilitates Fundraising Campaigns:

When running fundraising campaigns, mentioning the 80G benefit can be a persuasive factor, making fundraising efforts more effective.

•Financial Efficiency:

With more donations coming in due to the tax incentive, NGOs and trusts can channel a higher amount of funds into their welfare activities.

Documents Required for 12A And 80G Registration:

1-Registration Certificate and MOA / Trust Deed / Bye-laws:

This is the basic document that shows your NGO's existence.

2-Names & Addresses of the trustees/board members:

A complete list of the governing body or trustees of the organization.

3-PAN Card of the NGO:

A copy of the NGO's Permanent Account Number (PAN).

4-Details of activities:

A report detailing the activities of the NGO since its inception or over the past three years.

5-Registration Certificate:

If the trust or NGO is registered, its registration certificate.

6-Utility Bill:

Proof of the registered office's address, which could be an electricity bill, water bill, or house tax receipt.

7-Annual Activity Report:

A report detailing the activities of the trust/NGO for the last two years. Financial Statements: Statements of accounts, balance sheet, and the income & expenditure account for the past three years.

Points to Remember:

♦Validity:

While initially the 12A and 80G registrations were granted with a validity period, amendments mean these are now granted in perpetuity. However, they can be revoked if discrepancies or non-compliances are detected.

♦Compliance:

NGOs and trusts must maintain regular and detailed accounts, file income tax returns, and ensure they comply with all other requirements to avoid cancellation of these registrations.

Conclusion

The landscape of charitable work in India is vast, and standing out can be challenging. By obtaining certifications like 12A and 80G, NGOs not only enjoy financial benefits but also enhance their reputation in the eyes of potential donors. If you're an NGO or looking to start one, consider these registrations as your stepping stones towards a brighter and more impactful future.

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