Non-government organisations are organisations that are working for philanthropic works. Philanthropic work includes those works which are for charitable purposes. These organisation helps while solving many issues of society, like unemployment. As they work hand-in-hand with the government, they have been given various benefits by the government. Tax Exemption for NGOs under the Income Tax Act is one of them. But to get the above-mentioned tax exemption for NGOs, an organisation needs to take sections 12a and 80g registration that has been given under the Income Tax Act from the Income Tax Department of India. Such registrations are beneficial for both the donor and the NGOs. Hence, an NGO must take this registration without any delay.
Is it Mandatory to Get registration Under 12a and 80g?
Without getting registration under 12a and 80g of the Income Tax Act, any non-government organisation, even if it is working for charitable purposes, is not eligible to get these benefits. Hence to get the various benefits or advantages of tax exemptions, an NGO must get the above-mentioned registration from the Income Tax Department of India. Tax exemption for NGOs are available only if they have 12a and 80g registrations. These registrations will be taken in two steps. In the first step, one will get the provisional registration certificate, and after getting the provisional one, the NGO again needs to apply for the final registration.
Tax Exemption for NGOs Under the Income Tax Act
In the Income Tax Act, there are various benefits for the taxpayer has been given. There are certain special categories of taxpayers who get extra benefits. NGOs are one such category. Under section 80g and 12a of the ITA, tax exemption for NGOs has been mentioned. Some of the important points under the above-mentioned section regarding tax exemption for NGOs are given below:
Section 80g of the Income Tax Act
Under this section of the Income Tax Act, various Tax deductions have been given to those NGOs which are registered under the same section. Some of the important points in this section are given below:
- Donations made by individuals and companies can be deducted from their total income for tax purposes.
- Donations to specific funds and institutions are eligible for deductions. These include funds like the National Defense Fund, Prime Minister’s Relief Funds, educational institutions, and others.
- Donations to religious institutions are not eligible unless notified by the government.
- The deduction percentage depends on the type of fund or institution. For some funds, it’s the full amount of the donation plus 50% of the remaining aggregate. For others, it’s 50% of the aggregate of the donations made. The total deductions cannot exceed 10% of the gross total income.
- The institution or fund must be established in India for charitable purposes. It should not benefit a specific religious community or caste. It must maintain proper accounts of income and expenditure. It should be registered under relevant laws or approved by the government.
- Cash donations above a certain limit are not eligible for deductions.
- The section also includes provisions for deductions related to earthquake relief funds and sports infrastructure development.
- The section clarifies that deductions won’t be denied due to certain circumstances, like subsequent tax liability of the institution or fund. It also defines what qualifies as a charitable purpose and includes associations promoting specific sports as eligible institutions.
Section 12a of the Income Tax Act
Section 12a of the Income Tax Act gives various Tax exemption for NGOs, and the conditions to get this benefit are to have a 12a registration certificate. Getting tax exemption on the income of the NGO is not easy if the above registration certificate is not there. To get the benefit of section 12a, it is mandatory that an NGO must be a registered NGO. It can be a trust, society or section 8 company. If this registration is not there, an NGO has to pay the tax with the normal tax rate. Some of the benefits of this registration are given below:
- Attracts donors
- Helps in fundraising
- Maintain transparency
- Enhance the fundraising for the organisation
- Helps while doing legal compliances
- Get exemptions on many types of income like income from property, capital gain etc
Process to get 12a and 80g Registration
The process to get these two registration is an online process. One can get these two registrations after completing the following process:
- Visit the official website of the Department of Income Tax and create credentials
- Login through the credentials on the official website
- Fill all the required details in the Form 10A
- After completing the form, check it once and submit it
- Now, the department will verify the application
- If everything is fine in 8-10 days, the applicant will get the provisional registration certificate, and after that, one can apply for the final registration certificate from the same website.
While completing the above registration process, documents play a very important role. Hence it is suggested before starting the registration process, one must collect all the documents required for the 12a and 80g registration under the Income Tax Act. Some of the important documents for this registration include KYC documents, business address proof, PAN Card of the entity, address proof of the authorised person of the entity, shop and establishment certificate, GST registration certificate, documents of the entity like incorporation certificate, MOA, AOA, DSC, DIN etc.
Conclusion
Tax exemption for NGOs in India is a crucial benefit provided under Sections 12a and 80g of the Income Tax Act. These exemptions are instrumental in supporting and encouraging charitable work across various fields such as education, healthcare, and social welfare. However, it is important to note that obtaining registration under these sections is mandatory for NGOs to avail themselves of these tax benefits.
These tax exemption for NGOs serve as a significant mechanism for promoting and sustaining the vital work of NGOs in India, allowing them to continue their philanthropic efforts and contribute positively to society. By adhering to the registration requirements and leveraging these provisions, NGOs can ensure their financial stability and fulfil their mission of making a difference in various aspects of our society.
