The Income Tax Act provides for tax exemptions to institutions established in India that fall under specified category. Two key sections of the Income Tax Act, namely Section 12A and Section 80G, govern these exemptions. To benefit from these tax exemptions, organisations must register under Sections 12A and 80G and obtain the respective certificates. The registration under Sections 12A and 80G of the Income Tax Act in India is vital to avail the tax benefits and other benefits of 12A and 80G registration to NGOs.
Understanding 12A and 80G Registration in India
In India, organisations working towards non-profit objectives, such as NGOs, charitable trusts, religious bodies, and Section 8 companies, can benefit from two distinct registrations: Section 12A and Section 80G. 12Aa and 80G registration is important in India due to the benefits of 12A and 80G Registration to NGOs that follow from such registration. These registrations hold significant advantages in terms of tax exemptions and encouraging donations.
Section 12A Registration in India
Section 12A registration is pertinent to non-profit entities like NGOs, charitable trusts, religious organisations, and Section 8 companies. This registration facilitates tax exemptions on their surplus income. Importantly, Section 12A registration is a one-time process, and the resulting exemption certificate maintains lifetime validity. It is advisable for not-for-profit organisations to obtain this registration promptly after incorporation to maximise tax benefits.
Documents Required for Section 12A Registration
To obtain Section 12A registration, the following documents are essential:
1. Documents validating the creation of the trust or organisation (e.g., trust deed, certificate of incorporation, copies of MOA and AOA for Section 8 companies, MOA and registration certificate for societies).
2. Copy of the organisation’s PAN (Permanent Account Number).
3. Form 10A.
4. Annual accounts for the last three years (for trusts).
Section 80G Registration
Section 80G registration, as per the Income Tax Act, 1961, is intended for non-profit entities like NGOs, charitable trusts, religious organisations, and Section 8 companies. The primary purpose of this certificate is to incentivise donors to contribute by offering them tax deductions. Donors can avail these deductions by simply attaching the donation receipt, including details such as the donor’s name, donation date, and the organisation’s PAN.
Documents Required for Section 80G Registration
When applying for Registration under Section 80G, the following crucial documents must be provided:
1. Documents proving the establishment of the trust or organisation (e.g., trust deed, certificate of incorporation, copies of MOA and AOA for Section 8 companies, MOA and registration certificate for societies).
2. Copy of the organisation’s PAN.
3. Form 10G.
4. No Objection Certificate (NOC) from the owner of the property housing the registered office.
5. Copies of utility bills of the organisation.
6. List of donors with their address and PAN details.
7. Documents pertaining to the organisation’s book of accounts and income tax returns.
8. Details of welfare activities conducted by the organisation over the past 3 years.
9. In the case of trusts, a comprehensive list of board of trustees.
Eligibility for 12A and 80G Registration:
Before going into the benefits of 12A and 80G Registration to NGOs, it is essential to learn the eligibility for registration. These include:
- Generating no income from business activities.
- Being structured as charitable trusts, registered societies, or Section 8 companies.
- Utilising assets and income solely for charitable purposes.
- Maintaining accurate and transparent records of their organisational activities.
- Ensuring that owners or trustees do not unduly benefit from the organisation’s funds.
- Avoiding activities that favor a particular religion or caste.
What are the Benefits of 12A and 80G Registration to NGOs in India?
Under the Income Tax Act, 1961, certain benefits of 12A and 80G Registration to NGOs follow. These are detailed below:
Benefits of 12A Registration to NGOs
The benefits of 12A and 80G Registration to NGOs are manifold. Let us first discuss the benefits of 12A registration:
1. Tax Exemption:
Organisations holding a 12A certificate are exempted from paying income tax on their generated income. This substantial tax relief allows them to allocate more resources towards their charitable and philanthropic activities.
2. Access to Grants and Funds:
12A registration enhances an institution’s credibility, making it eligible to receive grants, funds, and support from both government agencies and international organisations.
3. Proof of Existence:
The 12A certificate serves as a legitimate proof of the institution’s existence. This documentation can be crucial in establishing the organisation’s credibility and eligibility for government schemes, and funds, streamlining the process of financial support.
Benefits of 80G Registration to NGOs
In the context of benefits of 12A and 80G Registration to NGOs, let us now discuss the advantages of 80G registration to NGOs, which have been mentioned below:
1. Tax Benefits for Donors:
Section 80G registration benefits not only the organisation but also its donors. Donors who contribute to organisations with an 80G certificate can claim deductions on their taxable income.
2. Enhanced Credibility:
Similar to 12A registration, obtaining an 80G certificate enhances the credibility of the non-profit organisation. Donors often seek out organisations with this certification as it assures them that it will be utilised for legitimate charitable purposes.
3. Attracting More Donors:
The 80G certificate helps organisations attract a broader base of donors, including corporate entities and individuals. This expanded donor network can significantly increase the organisation’s financial resources, allowing for the expansion.
4. Transparency and Accountability:
To maintain 80G registration, organisations are required to adhere to specific reporting and transparency standards. This ensures that they operate with a high level of accountability, which is reassuring to donors and regulatory authorities.
5. Increase in Goodwill and Credibility of the Organisation:
Possessing an 80G certificate bestows legitimacy and credibility upon the organisation. This enhanced reputation not only attracts more donors but also fosters trust among existing supporters.
6. Access to Government Funding:
Organisations with Section 80G registration are better positioned to receive financial support from the government. They are more likely to qualify for government grants, subsidies, and funding opportunities aimed at promoting charitable activities.
The benefits of 12A and 80G Registration to NGOs serve as a promoter for philanthropy and social impact. It not only provides tax benefits to donors but also enhances the credibility and funding prospects of non-profit organisations. By fulfilling the prescribed criteria, these organisations can create an environment conducive to charitable activities, thereby advancing their missions and benefiting society as a whole.
Final Thoughts
Registration under Section 80G of the Income Tax Act in India is a pivotal step for non-profit organisations. The benefits of 12A and 80G Registration to NGOs are many, including tax benefits for donors, increased organisational credibility, access to government funding, and eligibility for other vital registrations like Section 12A. These benefits not only incentivise contributions but also facilitate the growth and sustainability of charitable endeavours.
By meeting the stringent criteria and maintaining transparency, organisations can build trust among donors, attract more significant financial support, and ultimately make a more substantial impact in addressing societal needs. The benefits of 12A and 80G Registration to NGOs80G thus plays a crucial role in promoting a culture of philanthropy and advancing the welfare of communities.
