NGO can be benefited by the exemption from paying income tax by getting it registered and complying with certain other formalities. But Without 12A registration and 80G registration certificate, NGO cannot provide any benefit to the person making a donation. The Income-tax act 1961 has certain provisions which in return offer tax benefits to donors. All NGO's should not avail the advantages of these provisions in order to attract donors.
An NGO can get the benefits of exemption under the income tax act and for availing such exemption it needs to 12A registration & 80G registration of the income tax act. If any donor let it be an individual, firm, company or any person making a donation to NGO that is registered under 80G, get the deduction of about 50% from their taxable income and some may also qualify at the rate of 100%.
12A registration is one time but has the validity of a lifetime. NGO that is registered under 12A claims exemption of Income Tax. A newly registered NGO can apply for both types of registrations. Application for the registration under 80G Certificate and 12A Certificate can be applied separately and can be applied together also.
Every NGO, Trust, and societies have heard of such registration and also registered it under that to avail various taxation benefits to both societies as well as people to give donations to these societies. With the help of this registration NGOs, Trust and societies can obtain the maximum amount of donation from the general population. In simple words, you can say that it is beneficial for the NGOs, trusts, and societies to get them registered under 12A Certificate and 80G Certificate because even the people who are donating to the NGOs (Non-governmental organization), trusts and societies get tax exemption under the Income-tax act. Consequently, people will donate more to the NGO, trust, and societies which are registered under 12A certificate and 80G certificate.
However, One must note that NGOs (Non-Governmental Organization), trust and societies who are registered under 80G Registration and 12A Registration under the constitution of India are available for qualify for the funding from the government institution. There are a number of benefits that NGOs, trust, and societies can avail, each of the above-listed institutions gets itself registered under 12A and 80G registration, Doing so a particular organization does not have to pay any taxes for the entire lifetime if it gets registered under section 12A.
The fund used for religious and charitable purposes is considered as Income application. Income application is the expenses used for religious and charitable purposes when calculating the income of the trust.
The income which is received will be free from paying any tax.
A person who is registered under this section can get the benefit of accumulating and setting aside income which is not than 15% for religious and charitable purposes.
Benefits of Registration have been extended as per the Finance Act 2014 for the trust and institution that have been registered under section 12A.
Registration made under 12A is one-time registration, which means you just have to register only once and its validity will go on for lifetime till the date of cancellation of Registration. There is no need for renewing the registration.
NGOs (Non-governmental organizations) can also receive funds from various agencies. Also, these agencies are entrusted to provide grants to NGOs registered under 12A
The benefit of registering under 80G is that it provides deduction while calculating the total income in the hands of the donor.
A receipt of donation is given to the donor based on which donor can claim a deduction.
Note: There is no deduction allowed in respect of any donation under section 80G unless such donation is of a sum of money.
Note: When registration is granted under section 12 A, it does not mean you are given 80G approval. In other words Registration under section 12A will not provide automatic approval under section 80G. You have to apply separately for both of them.
Duly filled in form- 10A for registration under section 12A
Duly filled in form – 10G for registration under section 80G
Trust Deed/ MOU: A trust Deed or MOU of section 8 company is required
If the registered office is on rent then NOC ( No objection certificate) will be required from the landlord.
PAN card copy of NGO
Photocopy of Water bill/ Electricity bill
Balance sheet & Books of accounts for the preceding 3 years
List of Donors along with their PAN and address
List of governing board of trustees members with their contact detail
Original registration certificate
MOA Trust deed for verification
NGO should not be working for the benefit of a particular community
NGO must not have any income which is not exempted, Such as company income
NGO should be registered under the societies registration act, 1860 or under any law corresponding to the Act or Signed up under section 26 of the companies act, 1956
The bye-laws of NGOs must not contain any regulations for investing the income or possession of the NGO for the purpose other than charitable activities.
They must have maintained their books of accounts for its expenditure & receipts.
Step 1: Duly filled- in the application form will be submitted to the exemption section of the income tax department.
Step 2: After that notice for the clarification will be received by NGO from the Income-tax department within 2-3 months after applying.
Step 3: Consultant will submit the reply of the notice along with all the required documents to the Income-tax department.
Step 4: Consultant will visit the income tax department personally to follow up the case on behalf of the applicant organization.
Step 5: Exemption certificate will be issued.
1. What is 80g and 12a certificate?
80g is a certificate that is granted to certain Non-for profit organization by the income tax department or granting their donors the ability to avail of a tax donation and deduction. The non- profitable institutions and NGO’s with 12A are eligible for 80g certification.
2. What are the requirements for 80G AND 12A Registrations?
The NGO should not be working for a particular community or caste.
NGO’s should maintain their routine accounts for its expenditures and Receipts.
NGO’s must not have any income which is not exempted
The laws and goals of NGO’s must not contain any regulation for investing the income of the NGO for the purpose apart from charitable activities.
NGO should be registered under the societies registration act, 1860 or signed up under section 26 of companies act, 1956
3. What are the Benefits of 80G and 12A registrations?
Section 80G of the income tax act 1961 provides deduction while calculating the total income from the hands of the donor and that deduction is regarding a donation to certain funds, Charitable institutions, etc. If the quantity of reduction is more than 10% of the gross total amount income or to which the income tax is not payable under any arrangement of this act then the quantity in excess of 10% of gross total earning will not get deducted under 80G
4. What are the documents required for 12A and 80G Registration?
A copy of the PAN card of the NGO is required
Utility bills of the director
Summary of welfare activities carried out in the preceding 3 years are required for 12A and 80G Registration.
The list of donors with their id proof and address are required
Books of account and balance sheet for the preceding 3 years are required
Original Registration certificate of the NGO.
5. When can the NGO apply for 80G and 12A certificate?
NGO can apply for 80G and 12A certificate just after the registration of NGO.
6. How can I get an 80G Certificate?
Copy of PAN card of the trust/institute
Copy of electricity bill, water bill or house tax receipt
Proof of welfare activities
Statement of accounts and balance sheet or previous 3 years
Progress report since the foundation of NGO or for the previous 3 years.
List of donators along with their address and PAN card.
List of Governing bodies with their contact details
7. What are different modes of payments Eligible for Tax deduction?
Only cheque and cash donation quality for tax exemption
Donation made by the donor can also be deducted from his salary and receipt should be obtained in the name of the employer so that he would be allowed to claim an exemption under section 80G.
Donations made through gifts do not get tax benefits.
8. Who can avail tax savings under 80G?
A person who makes an eligible donation
Donations made to listed trust and organization are eligible for deduction under section 80G.
9. Who cannot get the benefit of tax savings under section 80G?
If a donor donated to a foreign trust then he cannot qualify for tax savings.
If the donation has been made to one or more political parties
If an NRI donates to eligible institution and trusts are also qualify for tax exemption under
the section 80G
10. How can I register a trust under section 12A?
Charitable or religious trust or institution can apply for the registration under 12A. For the registration, you need to fill Form-10A.