A Simple Guide to Section 12A and 80G Registration
Non-profit organizations play an important role in helping communities and supporting growth in India. They usually don’t have a regular way to earn money. Instead, they depend on grants, donations, and other types of support to keep running and achieve their goals. The 12A and 80G registrations are ways the government encourages people to support these non-profits. Let’s see how these registrations work!
What is Section 12A Registration?
Section 12A registration exempts NGOs from paying income tax on surplus income. This means your NGO can focus more on its mission rather than worrying about hefty tax bills. For guidance, online tax consultants can be very helpful in navigating this process.
Section 12A of the Income Tax Act explains how the rules in Sections 11 and 12 apply to NGOs. Section 11 says that some types of income don’t count towards the total taxable income for the previous year. Section 12 adds that this includes any money received from grants and donations meant for charity or religious activities.
What is Section 80G Registration?
NGOs get 80G registration so their donors can get tax deductions on their donations. This encourages more people to donate. Getting 80G registration is optional and can only be done after the NGO has 12A registration. Business consultants often recommend this step to enhance fundraising.
Section 80G (1) lets you exclude certain donations from your total taxable income. Clause (2) lists these donations in detail. It covers money given to a non-profit organization that has a 12A Registration. This organization must be based in India, and the money must be used only for charitable or religious activities.
Eligibility for 12A and 80G Registration
Section 12A allows charitable or religious organizations to register and get tax exemptions on donations they receive. To get this registration, these conditions must be met:
Type of Organization: Only trusts or institutions set up for charitable or religious reasons can apply. Charitable reasons include helping the poor, education, yoga, medical aid, protecting the environment, preserving historic sites, or any activity that benefits the public.
Charitable Work: The group must do charity work and not make money for individuals or specific groups.
Registration: The group must be officially registered as a trust, society, or Section 8 company under the Companies Act, 2013. Proof of this must be included in the 12A application.
Use of Income: The group’s money should only be used for charity or religious work, not for the benefit of its members or specific individuals.
Record-Keeping: The group must keep proper records of income, expenses, and activities.
Filing Returns: The group must file its annual income tax returns on time, even if it doesn’t have to pay taxes.
Documents Required for 12A and 80G Registration
To complete the online process for 12A and 80G registration, NGOs need to give documents that show they are officially registered. If they don’t provide these documents, their applications for 12A and 80G registrations might be incomplete and rejected. Here is a simple list of what’s needed for 12A and 80G registration in India:
1. Trust Deed, Society Registration Certificate, or Section 8 Company Certificate
2. Memorandum of Association and Articles of Association (only for Section 8 companies)
3. PAN card of the organization
4. Bank account statement of the organization
5. Audited accounts of the organization for the past three years
6. List of trustees, members, or directors
7. List of activities the organization has done
Who can apply for 12A and 80G registration?
This professional expert talk outlines the benefits and processes for NGOs to obtain Section 12A and 80G registrations.
Benefits of 12A and 80G Registrations
Getting 12A and 80G registrations provides big benefits for charities and NGOs:
Here’s the information rephrased in very simple and common language:
1. Tax Benefits for Donors: With 80G certification, donors can get a break on their taxes for giving money. This makes donating more attractive and can lead to more people giving.
2. Increased Trust: Being registered with 12A and 80G means the Income Tax Department approves the organization. This makes donors and partners trust the organization more because they know it’s transparent.
3. Improved Fundraising: Tax benefits make people and businesses more likely to give money. This helps NGOs collect more funds and expand their projects. Online tax consultants can provide useful advice to maximize these benefits.
4. More Government Grants: Many government grants need 12A and 80G registrations. This means more chances for important funding.
5. Stable Funding: Offering tax benefits to donors helps increase donations and build long-term relationships. This helps NGOs plan and carry out important projects over time.
6. Effective Use of Funds: With 12A registration, NGOs must keep detailed records and use money only for charitable work. This ensures resources are used properly.
Overall, 12A and 80G registrations help manage and increase funds while also improving the NGO’s reputation and ability to operate effectively. Business consultants often recommend these registrations to enhance an NGO’s financial health.
Validity of 12A and 80G Registration
When you first get 12A and 80G registration, it is given as a provisional registration that lasts for three years. To keep this status, you need to apply for renewal either six months before it expires or within six months of starting your operations, whichever comes first. After renewal, the registration is valid for five more years. You will need to repeat this process every five years to keep the benefits.
12A and 80G Registration Process Online
According to the Finance Acts of 2020 and 2021, NGOs need to use Form 10A for getting their 12A and 80G registrations. Here’s a simple guide to help you:
Note: Section 12AA has been replaced by Section 12AB. If your NGO was registered under 12A, 12AA, or 80G before April 1, 2021, you will need to re-register under Section 12AB.
Step 1: Set Up and Register Your NGO
Choose the right type of legal setup for your NGO, such as a trust, society, or Section 8 company, and register it with the right authorities.
Collect necessary documents like your registration certificate, MOA/Bye Laws/Trust Deed, audited financial statements, FCRA Registration, and NGO Darpan ID.
Step 3: Fill Out Form 10A
Complete Form 10A, available from the Income Tax Department’s website or local offices. Provide accurate details about your organization.
Step 4: Submit Your Application
Send Form 10A and documents to the Income Tax Commissioner’s Office or through the Income Tax Website. Keep copies for your records.
Step 5: Review and Inspection
The tax authority will review your application and may inspect your NGO’s activities and financial records.
Step 6: Registration Confirmation
If approved, you’ll receive a 12A and 80G registration certificate. If there are issues, you’ll have a chance to fix them.
Step 7: Obtain Your Registration Certificate
Once registered, you’ll get an official certificate confirming your NGO’s tax-exempt status, benefiting both your organization and its donors.
Process for Regular 80g Registration
· Submit Form 10G: NGOs must complete Form 10G and submit it with the required documents to the Income Tax Department.
· Inspection: The Income Tax Officer (ITO) may conduct an on-site inspection to verify the NGO’s information.
· Approval: Upon satisfactory review, the NGO will receive regular 80G registration, valid for five years.
