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.
What is 12A and 80G Registration?
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.
12A Registration
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.
80A Registration
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.
What are the Benifits of 12A and 80G Registration?
The advantages of obtaining the 12A and 80G Certificates are mentioned below:
Government Schemes and Grant
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
Tax Exemption
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.
Proof of Existence
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.
Application to Societies and Non-Profits Organizations
This type of certificate can also be used by societies that have complied with the Societies Registration Act's registration requirements.
What are the requirements for 12A and 80G Registration?
The following are essential requirements that must be met in order to be registered under Section 12A:
Only trusts or institutions founded exclusively for religious or charitable purposes are eligible for 12A registration.
The organization must be involved in endeavors that accomplish its charitable goals. The objective of such acts should not be to make money for the advantage of any specific person or organization.
The organization ought to be legally registered as a society or as a trust under the relevant statutes. Moreover, if it a Section 8 Company, then, it must be registered under the Companies Act of 2013.
The organization should not use its resources, whether direct or indirect, to benefit its members or any other particular person. The money should only be used for charitable or religious purposes.
To represent its revenue, costs, and operations, the organization must have accurate books of accounts and other pertinent documentation.
The organization must not be involved in any political activity and refrain from supporting any political candidates or parties. Political activity may result in the Section 12A registration being canceled.
The following are the essential requirements that must be met in order to be registered under Section 80G:
Only non-profit entities, such as societies, registered trusts, and section 8 companies are founded for religious or charitable reasons, are eligible for 80G registration.
Organizations registering 80G registration must have their income exempt from taxes in accordance with Sections 11 and 12 of the Income Tax Act. The organization must already have the 12A registration certificate before applying for 80G registration.
The institution or fund's constitution or governing documents should specifically limit how its assets and profits are used. This limitation makes sure that the fund raised for charitable purposes is only invested in fulfilling such purpose.
An institution cannot be founded exclusively to serve a certain caste or religious community in order to qualify for Section 80G registration.
Organizations that want to register under section 80G must keep accurate and consistent records of their financial transactions. This procedure is essential for proving responsibility and transparency in using funds.
Documents Required for 12A and 80G Registration
The list of documents required for 12A and 80G registration are as follows:
Proof of address where the organization is registered
Copies of utility bills (such as water and electricity bills)
Books of accounts of last three years.
Activity and Progress/Project Reports from the previous three years.
Donor list with contact information.
Last three years' bank account statements
12a and 80g Registration Process Online
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.
12a and 80g Registration Fees
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.
Why Choose PSR Compliance for 80G and 12A Registration?
PSR Compliance lets you connect with our trustworthy professionals. You can connect with us to fulfill all of your registration licensing needs. We have a proven track record of satisfied customers and this is what fascinates us to provide the best possible solutions and services to our clients.
Additionally, our clients are always able to monitor the development on our platform. We have a competent team to address any inquiries you may have regarding the 80G & 12A Registration process. You can leave everything on us and focus on the operations of your organization.
Frequently Asked Questions
Q1. What is the purpose of 80G Registration?
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.
Q2. What is the difference between 80G 12A registration?
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.
Q3. Which donations are eligible for the 100% deduction?
Contributions to any local government agency, association, or institution that has received approval from the government are fully deductible.
Q4. What is the validity of 80G Certificate?
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.
Q5. What if trust is not registered under 12A?
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.
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