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Deepti Shikha
| Updated: 16 Jan, 2020 | Category: 12A & 80G Registration, NGO

Tax Exemption for NGOs: Section 12A & 80G

12A and 80G Registration

Registering an NGO in India is beneficial for many reasons. The basic reason is the rebate received in Income Tax under Section 12A and 80G. NGOs with 12A Registration can claim a full exemption from the Income Tax department. NGOs with 80G Certification attract more donors for donating funds to the organization. If NGOs don’t get such registrations, they are subjected to regular Tax Rates. Furthermore, attracting donors for donations becomes difficult. By getting registered under 12A NGOs don’t have to pay tax for the entire lifetime.

Why should NGO apply for 12A and 80G Registration? – Benefits

Section 12A and 80G have their own implication and offer many benefits to NGOs with such registrations. Some advantages are listed below:

  • NGOs can get tax exemption simply by getting itself registered and fulfilling all the required formalities. But the donors are not benefitted with this registration process.
  • The person/ entity making donations can avail this benefit only if the NGO receives a certificate under 12A and 80G.
  • The person or organization will get a deduction of 50% of donation amount from the Taxable Income.
  • An NGO will receive Government Funding, only if registered under section 12A & 80G.
  • An NGO doesn’t have to pay tax just by getting 12A and 80G certificate.

What is the eligibility criteria of NGOs to get 12A and 80G certificate?

The basic eligibility criteria to get 12A and 80G Certificate are as follows:

  • The assets and income of the NGO should be for charitable purpose only.
  • The Books of Accounts should be properly maintained, including all receipts and expenditures.
  • NGO should not be formed with the help of any particular religion, caste or community.
  • The core objective of the NGO should be charity, and whole income should be from donations.
  • In case an NGO has a business income then the trustee of the NGO should maintain separate books of accounts to assure that the donations are not diverted.

Can an NGO be disqualified from exemptions received from 12A and 80G registration?

Yes, an NGO can get disqualified from exemptions.

Here are a few situations which may disentitle a donor from claiming Tax Deductions:

  • If a charitable organization or trust registered as an NGO engages in promoting interests of any particular religion, caste or community.
  • If the NGOs has any ‘non exempted income’ that is if they have any commercial purpose to give rise to incomes.
  • If the donor pays in cash, the Government from the budget 2018-2019 onwards has reduced the admissible deduction from 10,000 rupees to only 2,000 rupees. However, no such limit is made for cheque or other electronic modes of transfer.
  • If the routine account of expenditures and receipts is not maintained by the NGO.
  • If the NGO is not registered under the Societies Registration Act, 1860[1] or under section 8 of the Company Registration Act, 2013.

Read our article:NGO Registration – Step by Step Procedure

What is the process of Registration under Section 12A of the Act?

Before getting an exemption certificate under Section 12A, the NGO must be registered under the Income Tax.

certificate under Section 12A
  • The application is required to be filed along with Form 10A and Rule 17A of the Income Tax Act, 1962 and has to submit it to the Commissioner of Income Tax.
  • Next step is to submit the required documents for 12A registration.
  • Once the documents are submitted, next step that follows is tax officer Inspection. During the inspection process, Income Tax Department officials might ask for additional documents if required.
  • On successful verification and auditing of documents and evidences, the 12A certificate is awarded by the Income Tax Commissioner to the institution.
  • 12A registration certificate is valid for a lifetime period.

What is the process of registration under Section 80G of the Act?

process of registration in 80G
  • The application is required to be submitted in Form 10G.
  • All the required documents need to be submitted to the Tax Commissioner’s office. In case the Tax Commissioner asks for additional document or evidence it must be provided.
  • After submission of documents, the officer appointed for Inspection will verify the documents.
  • If satisfied after verification procedure 80G certificate will be issued.

Documents Required for Both Registration under Section 12A and 80G

List of documents required for registration is provided below:

1. Registration Certificate Memorandum of Association (MOA) or Trust Deed –two copies which are to be self-attested by the head of NGO.
2. NOC or No Objection Certificate received from landlord where the registered office is situated.  
3. Copy of registration with Registrar of Companies or Registrar of Firms and Societies OR Registrar of Public Trusts- Self Attested Copy.  
4. The Self Certified Copy of documents evidencing adoption and modification of the objects.
5. A copy of PAN Card of NGO or Trust or an Institution.
6. Photo Copy of the Electricity Bill or House Tax Receipt Bill or Water Bill.  
7. A proof of the welfare activities pursued.  
8. The list of the contributors and the donors along with their address and PAN.
9. A self-certified copy of registration granted or registration denied under section 12A if any.
10. The description of the overall business carrying out by the institution or trust.
11. A progress Report of previous three years since the formation of the NGO.

Issue of Certificate under 12A and 80G

The Tax Commissioner may pass a written order which would effectively register the trust or institution under 80G of the Income Tax Act. On non satisfaction, the commissioner has got all the powers to reject the certificate. The whole Registration process can take a time span of 3-4 months. The officer provides proper emphasis on documents.

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Conclusion

To summarize, registration under section 12A provides tax exemption to NGOs and section 80G works for the benefit of individuals and organizations willing to save tax. By following the procedure allotted by the NGOs, they can quickly get registered. It is better to make donations by way of cheque or online banking transfer. The application for 12A and 80G registration online can be filed together or separately as well. It is up to the commissioner to accept or reject the proposals of NGOs or trust. The document should be adequately submitted to avoid any chances of rejection.

Read our article:A Detailed Guide For Obtaining 80G Registration

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Deepti Shikha

Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.

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