Introduction

In India, non-profit organizations are essential to the country’s social and economic advancement. Nevertheless, they need a reliable source of income to produce their profits. Their primary funding sources include grants, donations, and other unrestricted contributions. These contributions enable them to continue operating and swiftly accomplish their goals. The government aims to promote such donations to nonprofit groups through the 12A and 80G Registration.

Let’s discover how!

An analysis of Income Tax Act Section 12A

The provisions of Sections 11 and 12 on NGOs that determine their applicability are found in Section 12A of the Income Tax Act. Section 11 excludes certain types of income from the total amount of taxable income from the prior fiscal year. 

Section 12 clarifies that voluntary contributions made as grants and donations for religious and charitable reasons are included in this income category. In the Income Tax Act, Section 80G certain types of contributions may be excluded from determining an assessee’s total taxable income under Section 80G (1). 

All of these contributions are listed in detail in clause (2). Any money sent to a nonprofit organization that has obtained the 12A Registration is included. The transferred cash must only be used for charity and religious causes, and the non-profit organization needs to be registered in India.

Who is eligible to submit an 12A and 80G Registration application?

Organizations of the following kinds may apply for Registration under 12A and 80G:

1. Charitable trusts
2. Registered societies
3. Section 8 corporations 

Benefits of registering under 12A and 80G

The possession of a 12A and 80G registration has various advantages, such as:

• Exemption from taxes: 12A Recognized organizations are not required to pay income tax on their earnings, which can result in significant financial savings for the firm.

• Benefits for donors: Contributions made to 80G-registered organizations are tax deductible. People may be inspired to give the organization additional money as a result.

• Credibility: The organization’s 12A and 80G registration indicate its credibility and dependability. By doing this, the group can draw in additional volunteers and contributors.

Documents needed for Registration under 12A and 80G

The paperwork above is needed for 12A and 80G registration:

1. The trust deed, proof of society registration, or section 8 company certificate
2. Articles of Association and Memorandum of Association (only applicable to Section 8 corporations)
3. The organization’s PAN card
4. The organization’s bank account statement
5. the organization’s audited financial statements for the last three years
6. List of the organization’s directors, members, and trustees
7. A list of the things the society has done

Eligibility for Registration in 12A and 80G

Charity or religious NGOs can register under Section 12A to be eligible for tax breaks on their donation revenue. The following are essential requirements that must be met to be registered under Section 12A:

The Organization’s Nature: 12A Only trusts or institutions founded exclusively for religious or benevolent purposes are eligible for registration. Section 2(15) of the Income Tax Act defines charitable purposes as the following:

• Aiding the impoverished
• Promoting education, yoga, medicine
• Conserving the environment (including watersheds, forests, and wildlife)
• Protecting monuments or locations of historical or artistic significance
• Advancing any other endeavor of general public utility

The organization’s actions need to be focused on achieving these goals.

Charitable Activities: The organization must participate in endeavors that help it achieve its goals for charity. The goal of these endeavors shouldn’t be to make money for the advantage of any specific person or organization.

Registration: In accordance with the relevant legislation, the organization needs to be registered as a society or a trust. Alternatively, the Companies Act of 2013 must be used for its formation if it is a Section 8 business. An application for 12A Registration must be filed with proof of their constitution.

Use of Income: The organization’s income or assets shall not be used directly or indirectly to benefit its members or any other particular person. The money should only be used for religious or philanthropic endeavors.

Upkeep of Books and Accounts: The organization must keep up-to-date books of accounts and other pertinent documentation to accurately reflect its revenue, costs, and operations.

Regular Return Filing: Regardless of whether it qualifies for an exemption, the organization must file its yearly income tax returns on time under section 139 of the Income Tax Act. Its tax-exempt status must be maintained by doing this.

No Political Activities: Neither the organization’s actions nor its endorsement of any political party or candidate may be considered political. Political activity may result in the Section 12A registration being canceled.

Commonly Asked Questions

1. What are 80G and 12A?

Trusts registered under 12A and NGOs are exempt from paying taxes—an NGO’s donor benefits from an 80G registration.

2. What makes 12A and 80G different from one another?

Section 12A Registration will help an NGO obtain an organization’s income exempt from tax. In contrast, section 80G Registration falls under section 80G of the Income Tax Act and benefits the NGO’s donor.

3. How can I apply online for 80G and 12A?

Applying for 12A and 80G online is possible with the help of expert tech-based online legal services.

4. How much tax is not subject to 80G?

Depending on the circumstances, the different donations listed in section 80G are fully or partially deductible, up to 100% or 50%.

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