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12A and 80G Registration: Explained

NGOs and non-profit organizations need to file for 12A and 80G certificates in order to exclude contributors' income taxes! It also facilitates NGOs' access to government financing. The Income Tax Department issues two registrations, 12A and 80G, to NGOs, charitable organizations, and Section 8 companies. These permits allow the organizations to benefit from tax exemptions and let contributors deduct their contributions from their taxes. For an NGO registered under 12A and 80G, it is more acceptable to receive substantial funds and multiple tax reliefs.

Charitable institutions in India are eligible for a number of benefits, including tax exemptions. While 80G Registration comes under Section 80G of the Revenue Tax Act and benefits the NGO's donor, Section 12A Registration aids an NGO in obtaining tax exemption for its revenue. For 80G and 12A registration, Corpbiz offers a wide range of services, such as application writing, advice, approval applications, name searches, and consulting.

Understanding Section 12A and 80G

Let us understand the provisions of Section 12A and 80G of the Income Tax Act.

Section 12A of the Income Tax Act, 1961

Section 12A of the Income Tax Act contains the provisions of Sections 11 and 12 on NGOs that determine their application. Section 11 reduces the total amount of taxable income from the previous fiscal year by a certain category of income. It is made abundantly evident in Section 12 that donations and grants given voluntarily for religious purposes are included in this revenue category. NGOs may seek Section 12A registration under the 1961 Income Tax Act.

The money received from grants, donations, and other unrestricted contributions is free from taxes for these organizations. To make use of benefits under Section 12A, non-governmental groups must register. 12A Registration is the initial step for non-profits seeking an Internal Revenue Service Certificate of Exemption. Companies that are registered under Section 12A are not required to pay income tax. Additionally, because 12A Registration serves as valid paper works of your non-governmental organization's existence, it aids in your clearance process with governments and foreign organizations.

Section 80G of the Income Tax Act, 1961

One type of non-governmental organization (NGO) to whom the Income Tax Department grants an 80G Certificate is a Section 8 business or charitable trust. The 80G Certificate's main objective is to encourage donors to give money to these non-profit organizations. Furthermore, contributions made to this kind of organization qualify for a 50% tax exemption as the donor can deduct the amount from their gross total income. Moreover, in order to be eligible for the exemption, the donor needs to attach the donation's stamped receipt. Such a receipt has to have the contributor's name, the gift date, and the organization's PAN on it.

Minimum Requirements for 12A & 80G Registration

The minimum requirements of eligibility criteria for 12A and 80G registration is given below

  • It must be non-profit or based on trust.
  • Your organization must offer charitable services.
  • Every year, an audit of your company's financial records is required.
  • Donations from businesses or professions to the organization are not accepted, and it is not a good idea to save income for later use or other ventures.
  • Prevent trustees or governing bodies from benefiting unduly.

The registration may be cancelled in the following situations

  • If an NGO is in charge of promoting caste, society, or religion.
  • If an NGO functions as a profit-driven business company.
  • If an NGO receives gifts or financial contributions from a foreign source or political party.
  • No member of an NGO may earn commercially from the organization's operations. If this kind of money is generated, it should be maintained separately from donations made to non-governmental groups. It is necessary to keep separate books of accounts for such an income.
  • If there occurs any violations of the 80G regulations, this certificate might be revoked.

What are the necessary papers required for 12A and 80G Registration?

Here are the necessary necessary papers required for 12A and 80G registration in India

Necessary Papers Required registration under 12A

  • A memorandum of association and copy of registration is required for societies registered under the Societies Registration Act 1860 and Section 8 companies.
  • A trust deed is required in case of a trust.
  • PAN is required in the case of an NGO.
  • Form 10G.
  • A No Objection Certificate (NOC) from the landowner where the firm has its registered office.
  • Bills for utilities.
  • All PANs and addresses of donors.
  • The income tax returns and books of accounts for the last three years, together with any other relevant paperwork.
  • The board of trustees' list.
  • The progress report of the last three years.
  • List of welfare activities.

Necessary Papers required for registration under 80G

  • PAN Card
  • Form 10 A
  • The latest three years' bank account statement for the trust.
  • A memorandum of association and the company's articles of association are required for businesses registered under Section 8 of the Companies Act 2013.
  • A trust deed, a self-certified copy of registration, or the society's or trust's articles of association.

Benefits of 12A and 80G Registration

Let's now look at the benefits of 12A & 80G registration

Tax Exemption for Donors

Contributions made to NGOs that are registered under Section 8OG are eligible for tax deductions, which is a significant incentive for donors.

Possibility of Getting Additional Funds

When tax advantages are offered, individuals and business organizations are encouraged to contribute to NGOs more freely. As a result, this increases the number of possible donations for the organization.

Resource Utilization Done Effectively

Its carefully maintained account books demonstrate that funds may only be utilized for religious and charitable purposes in compliance with 12A and 80G registration criteria.

Evidence of Existence

This certificate would be official, readable proof from the government that this kind of entity is registered. Legal verification would be required in order for the group to be eligible for a government grant or loan.

Use for NGOs and Societies

Societies that have properly registered in compliance with the regulatory requirements of the Societies Registration Act may also use this sort of certificate.

Awards and Programs for the Government

A group or organization can benefit from all government funds and programs by acquiring the Section 12A exemption certificate. This kind of registration would not be accessible if society or an NGO did not believe it to be suitable.

Donor tax savings

By using this NGO certificate, donors can reduce their tax liability while still paying a predetermined sum to the appropriate government authorities.

Enhanced Credibility and Trust

Both the 12A and 80G registrations lend legitimacy to the groups and ensure donor transparency.

Deduction under section 80G of the Income Tax Act

The employee who receives a "House Rent Allowance" often has the benefit of being guaranteed an accessible exemption under the Income Tax Act section 10(13A). However, there may be situations in which the person (whether self-employed or employed) pays the rent on his own property and is not eligible to receive the House Rent Allowance. Under such circumstances, the individual in question who is not receiving a House Rent Allowance may be eligible to claim an exemption under Section 80GG of the Income Tax Act of 1961.

Procedure for 12A and 80G Registration

The registration process to apply for 80G registration and 12A registration is mentioned below

Registration under Section 12A

The procedure for registration under Section 12A is mentioned below

  • Form 10A must be used for the application in accordance with the Income Tax Act of 1962 Rule 17A. The application must be sent to the Jurisdictional Commissioner of Income Tax (Exemptions).
  • Following receipt of the Form and any necessary accompanying evidence, the Commissioner verifies the organization's ability to conduct business.
  • Upon receipt of the satisfactory report, he will issue a formal order granting a 12A certificate. He is allowed to seek more information and evidence if necessary. Before rejecting the application, if he is not pleased, the applicant is given a fair chance to be heard.
  • If there is proof that the organization's activities are unlawful, contrary to the institution's objectives, favour a particular caste or religion, involve the use of funds for illicit activities, or use the institution's profits for the advantage of specific people, registration of charitable or religious organisation for 12A may be cancelled at any moment.

Registration under Section 80G

The procedure for 80G registration for a trust or institution is discussed below

  • Submit an application for 80G registration to the Internal Revenue Service Commissioner in the region that the organization controls.
  • After submitting an application for registration under Section 80G, the Income Tax Department will carefully analyze all of the paper works you have submitted.
  • If the authorities want further information, they will ask for additional necessary papers. The paperwork needs to be submitted by the deadline.
  • Then comes the grant of 80G registration. The Commissioner will grant the company an 80G Certification if the department is satisfied with the verification of the information and necessary papers submitted.

What is the Validity of 12A and 80G Certificates?

The 12A and 80G deductions are no longer available to charitable institutions for lifetime benefits; instead, they need revalidation. Corpbiz provides professional help for the purpose of revalidating registration under Sections 12A and 80G.

Validity of the 80G certificate

Registration renewals are valid for five years in line with the amended provisions of Section 80G. It is, therefore, necessary to resubmit the application for fresh registration of 80G at least six months before the registration's expiration.

Validity of 12A certificate

The 12A registration has been subject to new revisions by the amended Finance Act of 2020, which has extended its validity to five years after the certificate of revalidates registration is granted. Revalidation guidelines under Section 12A and Section 80G are similar.

Difference between 12A and 80G Registration

80G Registration

12A Registration

Donors who have made donations to Section 8 companies, registered charitable trusts, or other organizations receive a certificate known as an 80G. These donations are released from paying any taxes, either fully or partially.

Trusts, non-profits, and Section 8 entities registered under 12A have tax exemption under Section 12A on their excess earnings.

Only non-profits and NGOs holding a 12A certificate can be registered under Section 80G.

Incorporated trusts, Section 8 companies, and associations that advance public benefit without turning a profit are thought to be eligible for filing an application for 12A registration.

Why Choose Corpbiz?

Our organization specializes in streamlining and expediting the 12A and 80G registration process for Trusts or NGOs. Form 10A/10AB applications, re-registration, provisional registration, assistance with renewals, and trust-based 12A and 80G registration certificates are among the services we offer.

Our competent team has an extensive understanding of both Section 80G and Section 12A registration. Contact us for prompt and simple assistance with your registration requirements so that your team can focus on its essential charitable activity.

Frequently Asked Questions

Trusts, NGOs, and other Section 8 companies are exempt from making good on yearly assessments by virtue of their 12A registration. NGOs are essentially associations meant for both beneficial and non-beneficial purposes. They are nevertheless paid a salary and, should they not be included under section 12A of the Income Tax Act, would have to pay a charge at regular rates.

The requirements for 12A and 80G registration is that the company must have an NGO registration. An NGO shouldn't get any revenue from a commercial venture. The organization is required to keep a consistent book of accounts for its receipts and expenses.

By sending an online application in Form 10A to the Commissioner of Income Tax, together with the required paperwork, you can apply for Section 12A registration. For a smooth and hassle-free Section 12A registration process, get in touch with Corpbiz.

The Income Tax Department grants an 80G Certificate to a Section 8 Company, a charitable trust, or a non-profit organisation. The 80G certificate aims to inspire a growing number of donors to provide donations to these kinds of organizations.

Sections 80G and 12A registration are mandatory since they provide several tax advantages as well as additional benefits to donors and charitable organizations.

Societies incorporated trusts and Section 8 companies that serve the public good without profiting from them may register for Section 12A as long as they meet the conditions. Trusts and associations may be religious, welfare, or charitable.

Yes, completing a 12A registration is required in order to receive an 80G registration.

Obtaining an income tax exemption by getting registered under 12A is the main goal of 12A registration. Soon after incorporating, organizations usually file an application for 12A Registration.

No, the relevant institution can only seek the 80G registration subsequent to obtaining the 12A registration.

12A registration is valid for five years. After five years, you can renew the registration.

To get registration under Section 12A, a charity, religious trust, or institution may apply for registration using Form 10A. The online application submission process is required. The Commissioner should receive the application and any necessary supporting paperwork.

Without revalidation, you would not be able to benefit from the present 12A certificate for NGO and 80G deduction benefits. A new amendment introduced by the Finance Act of 2020 necessitates this revalidation.

Certain Indian not-for-profit organizations are granted an 80G certification by the Income Tax Department, which allows their contributors and members to claim a tax deduction on gifts or subscriptions, respectively.

Due to the tax benefits associated with 80G registration, both individuals and corporations are encouraged to make larger donations. As a result, the NGO's capacity for fundraising is increased, allowing it to embark on bigger and more significant initiatives.

PAN, Memorandum of Association, Certificate of Company Incorporation, Form 10A, bank statement for the previous three months, and other such necessary papers are crucial for the 12A and 80G registrations.

Certain donations meet the requirements for either a 50% or 100% assessment judgment, while others meet the criteria for the comparable finding up to the most severe limits of 10% of the citizen's adjusted gross total income.

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