NGOs mainly operate on donations. NGOs must register under Section 80G and Section 12A of the Income tax Act to claim those Tax exemptions (available to both donors and receivers). It's a time consuming process and at times tough for non-professionals to finish.
Furthermore, changes recently made it mandatory for all NGOs registered under these 2 sections to re-register under sections 80G and 12A to keep those tax benefits. Furthermore, an NGO seeking CSR funding must register using Form CSR-1.
What is 12A and 80G Registration?
Non-Profit Organisations are essential for economic and social progress of India. But they have no stable income from which to produce revenues on their own. They rely almost entirely on grants, donations and other unconditional contributions.
These contributions enable them to continue their operations and meet their goals promptly. 12A and 80G Registrations are ways the Government seeks to encourage such contributions to non-profit organisations. This is how it is done:
12A Registration:
NGOs obtain 12A registration under Section 12A of the Income Tax Act, 1961. It exempts these organisations from tax on their earnings from grants, donations and other unconditional contributions. All NGOs seeking Section 12A benefits are required to register.
80G Registration:
NGOs obtain 80G registration so that their donors can claim tax deductions on contributions to the organisations. The 80G registration is designed to encourage more donations for NGOs to support their welfare activities. This is a voluntary registration available only after 12A registration.
12A and 80G Registration Benefits
For charities and NGOs, obtaining Section 12A and 80G registrations under the Income Tax Act can be a transformative step. These registrations entitle the holder of official recognition from the Income Tax Department and provide access to numerous advantages that propel the organisation's mission.
From creating a culture of openness and accountability to promoting fundraising efforts, 12A and 80G registration has enormous impact and importance.
|
Benefits
|
Description
|
|
Tax Exemptions for Donors
|
Donors enjoy tax benefits when contributing to NGOs registered under Section 80G.
|
|
Enhanced Credibility & Trust
|
12A & 80G registrations build credibility and transparency, helping donor trust.
|
|
Greater Fundraising Potential
|
Tax incentives encourage increased donations, expanding fundraising opportunities.
|
|
Access to Government Grants
|
Essential for eligibility criterion also, 12A & 80G registrations give and provide access to governments funding.
|
|
Long-term Sustainability
|
Tax benefits enable NGOs to plan and execute long-term projects, ensuring sustainable impact.
|
|
Efficient Resource Utilisation
|
Funds from registrations are dedicated to charitable and religious purposes, optimising usage.
|
Eligibility for 12A and 80G Registration
For 12a 80g registration, NGOs have to meet these criteria:
Eligibility Criteria for 12A Registration
|
Eligibility Criteria for 12A Registration
|
Description
|
|
Nature of Organisation
|
Trusts or institutions organised entirely for charitable or religious purposes as defined in Section 2(15) of the Income Tax Act.
|
|
Charitable Activities
|
Activities must serve charitable purposes such as relief to the poor, education, medical relief, preservation of environment, monuments, or advancement of any other object of general public utility. Activities should not primarily benefit a specific group or person for profit.
|
|
Registration
|
Must be registered as a trust, society, or under the Companies Act, 2013 as a Section 8 company. Application for 12A registration must include proof of constitution.
|
|
Income Utilisation
|
Assets and income should not be utilised for the benefit of members or specific individuals. Income should be exclusively used for religious purposes or charity.
|
|
Books and Accounts Maintenance
|
Proper maintenance of books of accounts and other documents reflecting income, expenses, and activities is mandatory.
|
|
Returns Filing - Regular
|
Annual income tax returns which come under section 139 of the Income Tax Act have required to be filed timely, despite being exempt, to maintain tax-exempt status of entity.
|
|
No Political Activities
|
Prohibition on engaging in political activities or supporting political parties or candidates to avoid cancellation of Section 12A registration.
|
Eligibility conditions for 80G Registration
|
Criteria
|
Description
|
|
Nature of Organisation
|
Only non-profit organisations (such as registered trusts, societies, and section 8 companies) with charitable or religious purposes may apply for 80G Registration.
These purposes must be observed by the public, not by any private person or class of private persons. Charitable purposes are given in Section 2 (15).
|
|
Organisation must be Registered under Section 12A
|
Organisations seeking 80G registration must receive Tax exemption under Sections 11 and 12 of the Income Tax Act. For this, the organisation needs to have the 12A registration certificate.
|
|
No Other Non-Charitable Use of Income
|
The constitution or governing rules of the institution or fund should specify limitations on how its income and assets are to be used. This restriction limits the funds raised through charitable activities to those activities only.
|
|
Non-Exclusivity of Beneficiaries
|
An institution seeking Section 80G registration must not be established for the sole purpose of serving a religious community or caste alone. This condition ensures that the benefits of charitable pursuits are distributed more broadly instead of being confined to a select few.
|
|
Normal Accounting
|
Organisations who is seeking 80G registration must keep proper as well as regular accounts of the financial transactions.
|
Documents Required for 12A and 80G Registration
The 12a and 80g registration process online requires eligible NGOs to submit a set of documents attesting their legal status as entities. Without these documents the 12A & 80G registration applications may be considered incomplete and rejected by the concerned authorities.
|
No.
|
Documents Required
|
|
1
|
Self-certified original copy of the instrument creating the trust or institution, if applicable
|
|
2
|
Self-certified document attesting to the creation of the trust or institution, if not created under an instrument
|
|
3
|
Self-certified Registration Certificate of the Institution along with Memorandum of Association/Bye Laws, if any
|
|
4
|
FCRA Registration Certificate, if registered under FCRA
|
|
5
|
Two copies of the annual Accounts for the previous 3 financial years (if applicable)
|
|
6
|
Audit report of the previous year's accounts prepared by a Chartered Accountant (if required)
|
|
7
|
NGO Darpan ID, if applicable
|
12A and 80G Registration Certificate
The first registrations granted under 80G 12A registration shall be provisional and valid for three years only. A renewal of this given provisional registration have to be applied 6 months before the validity expires or inside a period of 6 months of activities starting, whichever occurs first. The renewed registrations will be granted for 5 years at a time.
12A and 80G Registration Process Online
New changes under the Finance Acts of 2020 and 2021 mean that form 10A is the primary application Form for registrations under Sections 12A and 80G of the Income Tax Act. Given below is the new and updated 12A and 80G registration process online in a step wise manner below.
- Step 1: NGO Formation and Registration
First, choose your legal framework for your NGO - trust, society or Section 8 company depending on your state law. After you are decided with the legal structure, register your organisation together with the Registrar of Societies, Registrar of Companies or another governing authority.
- Step-2: Document Collection
Collect documents necessary to file the 12A and 80G registration applications in form 10A. They include your organisation Registration certificate, MOA / Bye Laws / Trust Deed, audited financial statements, FCRA registration, NGO Darpan ID etc. These documents will attest to your NGO's existence and legitimacy.
- Step 3: Application Preparation
Fill out form 10A, the official application Form for registration under Section 12A 1and1 80G of the Income Tax Act. This particular form is readily available at the Income Tax Department's official Web site or your local Income Tax office. Include your organisation's objectives, activities and governing body members in the form.
- Step-4: Application Submission
Send the completed Form 10A and the required documentation to the Office of the Income Tax Commissioner and the Income Tax Website. This submission completes your 12A/80G registration. Keep copies of all submitted documents for yourself.
- Step-5: Review Inspection
After receiving your application, the tax authority will review its contents to make sure your NGO meets the requirements for Section 12A/80G registrations. They may even inspect your organisation's activities and financial records to verify compliance and authenticity.
- Step-6: Registration Decision
One of two scenarios will occur, depending on the review and inspection results. If your application meets the requirements and is vetted, the tax authority will register your NGO under Section 12A/80G. Or else, we may reject your application due to problems or discrepancies. You can address concerns and respond accordingly here.
- Step-7: Registration Intimation
A tax authority will issue an official registration certificate upon successful registration. This certificate verifies your NGO is eligible for Tax exemption under Section 12A/80G of the Income tax Act. It's a vital document that gives your organisation legal standing and allows you to claim tax exemptions for your NGO and its donors.
Cancellation of Registration
A Certificate under Section 12A registration or 80G registration can be cancelled under the following circumstances:
- Promotion/Benefit of Religion/Community/Caste: NGO promoting or benefiting a specific religion, community, or caste can lead to cancellation.
- Funds/Gifts from Political Parties/International Sources: Receiving non-compliant funds or gifts from political parties or international sources can result in cancellation.
- Commercial Profit-based Unit: Operating as a profit-based unit rather than focusing on charity can lead to cancellation of 80G registration.
- Member Making Commercial Profit-based Earnings: Any member earning commercial profits through NGO activities without proper accounting can result in cancellation.
- Misuse of 80G Provisions: Misuse or violation of 80G provisions, like providing false information, can lead to cancellation of exemption certificate.
12A and 80G Registration Fees
|
Registration Type
|
Organisation Type
|
Registration Fee
|
|
12A
|
Charitable Trust/Institution
|
Rs. 500
|
|
12A
|
Non-profit Company/Society
|
Rs. 2,000
|
An application along with the required documents and fees is submitted to the Income Tax Department for 12A registration. The 12A 80G registration fees vary by organisation type. The fee payable for a charitable trust or institution is usually Rs. 500; for a non-profit company or society the fee is Rs. 2,000. However, these fees may change so always check the latest regulations or contact a professional for current information.
After an organisation obtains 12A registration, it can apply for 80G registration. Fees for 80G registration process and 80G application form are separate from 12A registration. Again, the fees may vary by organisation structure. Note that the 80G registration fee is mostly higher than the 12A registration fee.
Why Choose StartupFino for 12A and 80G Registration?
StartupFino is a company that provides complete services for 12A and 80G registration. We can help with advice in the initial phase, through to ensuring you have all the requirements met and keeping your NGO in good legal standing.
