12A & 80G RegistrationCompany Registration

All about Section 12AB and Section 80G Registration

calendar14 Mar, 2024
timeReading Time: 4 Minutes
Section 12AB and Section 80G

In India, Sections 12AB and 80G registrations are crucial for charitable organizations and those wishing to support them. If qualified, Section 12AB assists non-profit organizations in registering and adhering to regulations so they can perform good deeds without having to pay income taxes. Donors who donate to qualified charities can benefit from Section 80G by deducting certain expenses from their taxes. This motivates people to give to worthy projects. Donors must make informed contributions and receive tax benefits, as well as charities, to be aware of these parts to profit from registration. It functions similarly to a way to aid charity while also receiving some tax relief. Section 12AB Registration provides exemptions to NGOs, while Section 80G Registration provides exemption for NGO donors. 

Section 12AB Registration

Section 12AB Registration states that any charitable organization having such registration under the Income Tax Act would be exempted from filing income tax on the charities they receive. Earlier it was done under the section 12AA. Failing to have obtained Section 12AB Registration, these organizations have to pay tax on income above surplus and would be subject to no exemptions to NGO. The NGOs having registration u/s 12AA have to re-apply and get the registration done u/s 12AB for exemption.

Important Provision of Section 12AB registration

There are a few important provisions for Section 12AB Registration as per the act –

  • The NGOs having registration u/s 12AA have to reapply and get the registration done u/s 12AB for exemption.
  • The trusts or organizations that are newly formed and are applying for Section 12AB registration under the act will be given a provisional registration for a period of three years.
  • The renewal request on this provisional registration can be made six months before the provisional registration expiry. 
  • The renewal time for each Section 12AB Registration would be five years from the date of grant of such registration. After this period, these organizations are required to submit a renewal application.

Advantages of Section 12AB registration

The advantages of section 12AB registration are –

  • Exemptions to NGO on the income received during the period.
  • Perks like getting grants from the central government or other local and international agencies.
  • There are many benefits involved while getting the FCRA registration.

Section 80G Registration

Section 80G registration provides an exemption for NGO donors in paying the income tax as per the Income Tax Act. The taxable income of the donor would be eligible for the exemption after providing the receipt of such donations.

Important Provision of Section 80G Registration

There are a few important provisions for Section 80G Registration by the NGOs as per the act –

  • There should not be any income of the NGOs that are not exempted from deduction as per the act. If the NGOs have such incomes, then the business transactions from such incomes should be separately maintained in the books of accounts, thereby not intending to divert the donations received for another purpose.
  • The rules, regulations, or by-laws of the NGO should not contain clauses in which they use the donations made to them for a purpose other than that of a charitable institution.
  • The objective of the NGO should not be to help a particular set of people belonging to a religious group. There should be no discrimination based on caste, colour, creed, sex, religion, etc, as mentioned in the constitution of India.
  • These organizations are required to maintain the books of accounts and other records of their expenditure and receivings.
  • They have to mention the details of the person or entities donating and must give them the certificate for their donation to the organization.
  • Exemption for NGO donorswould not be given under this registration if they opt for a reduced tax rate.

Advantages of Section 80G Registration

Section 12AB and Section 80G have a good impact on people as well as charitable institutions while claiming deductions under the Income Tax Act. The advantages of Section 80G registration are listed below –

  • This registration provides tax benefits for the NGOs getting the registration done.
  • The NGOs give the certificate of donation to the donors that help them claim an exemption for NGO donors while filing the Income Tax.
  • If the registration is done by the NGOs, then the donors (can be an entity or an individual) donating the money will get tax deductions of 50% on their taxable income.
  • With this registration, there is a good chance for the NGOs to attract more donors for their organization.

Documents for Section 12AB and Section 80G Registration

There are certain documents required to get the Section 12AB and Section 80G registration done, which are –

  • Registration document of the charitable institution that declares it a non-profit organization (like a Trust, section 8 company, a company registered under the Societies Act, etc).
  • Directors or trustees’ PAN card along with the Aadhar card
  • Directors or trustees’ signatures in a digital form
  • Important documents like Memorandum of Association, Articles of Association, and the by-laws of the company. 
  • Reports of audit of all the previous financial years since the incorporation of the entity.
  • Audited finances of the entity for all the previous financial years since its incorporation as a charitable institution.

Conclusion

Section 12AB and Section 80G registration come up with many benefits to both the organization as well as to the donor. It gives much-needed credibility to the non-profit organization and also makes them eligible to claim benefits from the government as well as local and foreign entities that donate to help for the public cause. Section 12AB and Section 80G of the Income Tax Act recognize the efforts of these entities and the individuals, and this is why tax exemptions to NGOs and also the exemption for NGO donors are given. Section 12AB and Section 80G have a huge impact on society since more donations are made to these organizations, thereby leading to societal help and an economic boost to the country.

If you are an NGO and looking for Section 12AB and Section 80G registration, then Corpbiz can be your ideal partner. We help organizations from the very beginning, which includes documentation and registration of these companies, alongside helping them to get their Section 12AB and Section 80G registration done in very little time. We have a pool of learned individuals who can cater to your problems and can give you good advice on how to proceed with certain regulatory things.  

Frequently Asked Questions

  1. Which type of Companies can register for Section 12AB and Section 80G?

    To register for Section 12AB and Section 80G, the organization must be registered as a society under the Societies Registration Act 1860, a Trust as per the Indian Trusts Act 1882, or as a Section 8 company as per the Companies Act 2013. Proof of their registration under the said act has to be given to get the registration done.         

  2. Is it possible to get Section 12AB and Section 80G registration at once?

    No, an NGO cannot get Section 12AB and Section 80G registration simultaneously. Only after getting the registration of Section 12 AB, an organization can apply for registration under Section 80G of the Income Tax Act 1961.

  3. How does section 80G registration benefit NGOs?

    After getting the section 80G registration, the NGOs attract many individuals and entities for donations since they will not have to pay the income tax on that contribution. This way, NGOs receive hefty amounts of funds that they can use to fulfil the purpose of registering a company as a non-profit entity.

  4. What is the significance of section 12AB and section 80G registration?

    By doing the Section 12AB and Section 80G registration as per the Income Tax Act of 1961, the government grants exemption for NGO donors as well as exemptions to NGOs under the act.

  5. What happens when an NGO is receiving income from other sources?

    There should not be any income of the NGOs that are not exempted from deduction as per the act. If the NGOs have such incomes, then the business transactions from such incomes should be separately maintained in the books of accounts, thereby not intending to divert the donations received for another purpose.

  6. Are there any requirements to get section 12AB and section 80G registration?      

    Yes, the requirements to get Section 12AB and Section 80G registration for an organization are-
    · The organization must be a registered charitable institution as per various applicable laws.
    · The organization first has to get registration for Section 12AB and then can apply for Section 80G registration.
    · There must not be any income for the NGOs from other business.
    · The organization should keep the books of accounts maintained, highlighting their expenditure and the donations made.

  7. Which forms are used for Section 12AB and 80G registration?

    Two forms are used for Section 12AB and 80G registration, and these are –
    Form 10A is for registering under section 12A, and Form 10G is for registering under section 80G of the Income Tax Act 1961.

  8. What is the fee and time duration to get these registrations done?

    The fee taken for Section 12A registration is Rs 500 for trusts and Rs 2,000 for companies registered under the Societies Act or the Companies Act. However, section 80 G's fee may be high and may vary. The time taken to get the approval of registration from the Income Tax Department may take some time, going up to a few months, depending upon the documentation and other factors. 

  9. How much deduction can an individual claim?

    The deduction that an individual can claim from section 80G can range between 50% – 100% of the total limit.

  10. Can donations made to foreign trusts be claimed for deduction u/s 80G?

    No, the donations made to the foreign trusts by the individuals or entities cannot be claimed for tax deductions as per section 80G of the IT Act.

Read Our Article: How To Get 80g Registration For Trust?

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