12A And 80G Registration
12A and 80G registrations are critical tax provisions for NGOs in India, enabling charitable institutions to avail themselves of specific tax exemptions and benefits. These exemptions are governed by Sections 12A/12AA and 80G of the Income Tax Act of 1961:
12A Registration
This certification is provided under the Income Tax Act 1961 to non-profit organisations in India. Once registered under Section 12A, an NGO becomes eligible for tax exemption on its income, meaning it doesn’t have to pay tax on surplus funds generated through grants, donations, or other revenue as long as these funds are used for charitable purposes. This registration is crucial for NGOs as it helps in maximising the funds available for their activities.
80G Registration
While 12A registration benefits the NGO, 80G registration is intended to incentivise donors. It allows individuals or entities who donate to a 12A-registered NGO to claim a deduction on their income tax. This deduction is a percentage of the amount donated and can significantly reduce the donor's taxable income. The purpose of this provision is to encourage more donations by providing financial benefits to donors.
Both registrations enhance NGOs' ability to attract contributions by offering fiscal advantages to both the organisations and their benefactors.
Who can apply for 12A and 80G registration?
The following types of organisations are eligible to apply for 12A 80G registration,
Charitable Trusts: Organizations established for charitable purposes.
Registered Societies: Societies that are formally registered under the Societies Registration Act or similar state laws.
Section 8 Companies: Companies formed under Section 8 of the Companies Act 2013 specifically for promoting charitable activities.
Religious Organizations: Groups that primarily focus on religious activities and charitable work.
Educational Institutions: Non-profit schools, colleges, and educational foundations.
Medical Institutions: Non-profit hospitals and medical research organisations
Benefits of 12A and 80G Registrations
The benefits of obtaining 80G and 12A registrations for charitable organizations and NGOs are substantial, impacting various aspects of their operations:
Tax Exemptions for Donors: NGOs with 80G certification can offer their donors the advantage of tax deductions on their contributions. This makes donating more attractive and can lead to increased support.
Enhanced Credibility and Trust: Being registered under Section 12A and 80G lends an official stamp of approval from the Income Tax Department, enhancing an NGO's credibility. This trust factor is crucial for donors and partners who seek transparency in operations.
Increased Fundraising Potential: The tax benefits associated with these registrations encourage both individuals and corporate entities to donate more generously. This broadens the potential fundraising base, allowing NGOs to expand their activities and reach.
Access to Government Grants: Many government programs and initiatives require NGOs to have 12A and 80G registrations to qualify for funding. This opens up numerous opportunities for grants that are critical for project financing and operations.
Long-Term Sustainability: The ability to offer tax benefits to donors not only boosts immediate donations but also helps in building long-term partnerships, ensuring sustainable funding sources. This stability allows NGOs to plan and execute impactful, long-term projects.
Efficient Utilization of Resources: With 12A registration, NGOs must maintain meticulous records and use their funds strictly for charitable purposes. This ensures that resources are used effectively and for the intended goals of the organisation.
