Understanding 12A and 80G Registration for NGOs: Procedure, Advantage, and Eligibility

 

Whether you have a not-for-profit organization in India or are about to start one, it is imperative that you learn how to achieve 12A and 80G registration. Not only does it lead to vast tax relief, but it also makes your organization legally valid as per the donors and government departments. Today in this blog post, we are going to walk you through the process of achieving 12A registration, advantages, who are eligible to apply, and what documents are required.

What is 12A Registration of NGOs?

12A registration of NGOs is a certificate issued by the Income Tax Department of India that exempts charitable trusts from taxation. Once an NGO has registered under Section 12A of the Income Tax Act, it does not have to pay income tax on its excess income if the income is utilized only for charity.

What is 80G Registration?

While 12A registration grants exemption to the NGO from tax, 80G registration grants tax deduction to donors who contribute their contribution to the NGO. This attracts your NGO to would-be donors since they can claim a deduction of the contributed amount.

Advantages of 12A Registration

Obtaining 12A registration has some benefits:

·       Tax Exemption: The largest advantage is tax exemption on income, and NGOs can spend all the collected donations on welfare activities.

·       Credibility: An NGO with 12A becomes credible to government departments, private agencies, and donors.

·       Grant Eligibility: Government and foreign agencies prefer 12A and 80G-certified NGOs while sanctioning grants.

·       Donor Attraction: It makes it easy for NGOs to attract donors because it gives them the benefit of tax exemption under 80G.

·       Improved Compliance: It is easy to be financially transparent and promotes good governance of the NGO.

Eligibility for 12A Registration

The NGO should legitimize itself before applying to become eligible for 12A registration:

·       The NGO should be registered under the Societies Act, Trust Act, or Section 8 Company.

·       It must be constituted for charitable or religious purposes.

·       The income of the organization may only be expended on charitable purposes.

·       It shall not engage in business for profit.

·       Such an NGO shall maintain books of accounts on a regular basis and comply with reporting requirements as mandated by law.

How to Apply for 12A Registration

If you want to learn how to apply for 12A registration, below is a step-by-step process to walk you through it:

Step 1: Prepare Legal Documents

Ensure that your NGO is registered under any of the legal forms such as Trust Act, Societies Registration Act, or Companies Act (Section 8).

Step 2: Gather Necessary Documents

You’ll need a comprehensive set of documents, which we’ll list later in this blog.

Step 3: Fill Form 10A

The application for 12A registration must be filed using Form 10A on the income tax e-filing portal.

Step 4: Upload Required Documents

Scan and upload all the documents as needed in your desired format.

Step 5: Verification and Submission

Application, once submitted online, is verified by the Income Tax Department. An acknowledgment receipt is provided.

Step 6: Scrutiny and Approval

The application will be scrutinized by the Income Tax Commissioner. If they are satisfied with the application, they will issue a 12A registration certificate. In some cases, there may be a request for additional documents or clarification.

12A and 80G Registration Procedure

12A and 80G may be done collectively or in stages based on your preparation and documents.

Step-by-Step Procedure:

·       Submit Form 10A for 12A and 80G under the Income Tax Act.

·       Submit the application on the Income Tax Portal using your NGO PAN.

·       Document everything that is needed, such as PAN, registration certificate, MOA, finance statements, and activity reports.

·       Take the acknowledgement and wait for the income Tax Commissioner's green signal.

·       Provided it's sanctioned, your organization will receive document 12A and 80G registrations independently.

·       Note down the point that both the registrations are 12A and 80G for 5 years, which are further to be renewed.

Documents Needed for 12A Registration

Following document checklist is to be submitted for 12A document registration:

·       PAN card of the NGO

·       Registration Certificate in terms of the relevant Act (Trust Deed, Society Certificate, or Section 8 Incorporation Certificate)

·       Memorandum of Association (MOA) and Articles of Association (AOA)

·       Details regarding trustees or members of the governing body

·       Utility bills or registered office address proof

Bank statements

·       Annual report or activity report of last three years (if NGO is available)

·       Financial statements of last three years (if available)

·       Digital Signature Certificate (DSC) of the authorized signatory

·       Properly filled and signed Form 10A

·       Verify all documents are scanned properly and self-attested to avoid delay or rejection.

·       Tips for Avoiding Common Mistakes

·       Insufficient or lacking documents

·       Mistaken entry of incorrect details in Form 10A

·       Lack of compliance with post-registration formalities

Forgetting the renewal date (12A and 80G over 5 years)

12A registration of NGOs is a wise step that allows organizations not to worry about tax issues while pursuing their mission. Coupled with 80G registration, it also adds to the appeal of the NGO from a donor's perspective in terms of tax exemption.

Knowing mentally how to go about 12A registration, the eligibility requirements for 12A registration, and keeping the documents to be filed under 12A registration ready well in advance can simplify the process to a large extent. 12A and 80G registration process looks complicated at first, but through professional guidance from portals such as NGO Partners, it is actually done very easily and efficiently.

If you are going to register your NGO and/or re-register your already obtained registration, then come to NGO Partners for expert advice and trouble-free registration service.

 

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