80G and 12A Registrations
In India, non-governmental organizations (NGOs) and other non-profit entities that engage in charitable activities can benefit from tax exemptions and increased donor support by obtaining 80G and 12A registrations under the Income Tax Act. These registrations are crucial for NGOs, trusts, and Section 8 companies as they promote transparency, credibility, and tax efficiency, benefiting both the organization and its donors.
What is 12A Registration?
12A Registration provides tax exemption on income earned by charitable or religious institutions. Once an NGO is registered under Section 12A, its income is exempt from tax, meaning it is not required to pay income tax on surplus funds or donations received. Key points include:
Application Process for 12A Registration:
Filing Form 10A
NGOs must file Form 10A with the jurisdictional income tax commissioner.
Document Submission
They must submit foundational documents like the Memorandum of Association (MOA), Trust Deed, PAN, financial statements, and activity reports.
Approval
After verification, the Income Tax Department grants 12A certification.
Certificate Issuance
Upon approval, the Income Tax Department issues the 12A registration certificate, which must be retained for future compliance and verification.
What is 80G Registration?
80G Registration allows donors to receive tax deductions on donations made to an NGO. With this certification, donors can claim tax deductions of 50% of their donation amount, incentivizing charitable giving by reducing taxable income. The primary objective is to encourage donations towards charitable causes, benefiting both the NGO and donors.
Application Process for 80G Registration
1. Form 10G Submission
NGOs must file Form 10G with the jurisdictional income tax commissioner.
2. Required Documentation
This includes registration certificates, details of the organization’s activities, PAN, MOA, financial records, and details of past projects.
3. Verification and Approval
The department verifies that the NGO’s activities align with charitable objectives before granting 80G approval.
Benefits of 80G and 12A Registrations
1. Tax Efficiency for NGOs
With 12A, NGOs can use more funds for charitable work as they are exempt from paying tax on income.
2. Increased Donations via 80G
Donors are more inclined to contribute due to the tax benefits, leading to greater funding for NGO projects.
3. Credibility and Transparency
12A and 80G registrations improve the NGO’s credibility, as compliance with tax norms enhances its reputation among donors and government bodies.
4. Eligibility for Government Grants
Many grants, especially those from government sources, require NGOs to have 12A and 80G certifications, making these registrations essential for funding.
Conclusion
80G and 12A registrations are valuable tools for NGOs in India, enabling them to maximize resources for charitable activities while attracting more donations through tax benefits. These registrations not only benefit NGOs but also encourage more people and companies to contribute towards social causes, creating a sustainable support system for the non-profit sector.