For NGOs in India, 80G And 12A Registration is particularly beneficial. Due to a tax exemption afforded by 12A Registration on their surplus, NGOs are essentially exempt from paying taxes. However, an 80G Certificate for Trust enables to offer tax-exempt certificates to donors in order to persuade them to make financial donations. Donors can claim significant tax savings when they give to NGOs having an 80G Registration Certificate. 80G And 12A Registration are necessary to assist non-profit and philanthropic organizations’ financial support, accountability, and openness, which increase their influence across the nation. The Income Tax Department issues an 80G And 12A Registration Certificate to support non-governmental organizations (NGOs) such charity trusts or Section 8 Companies.
If NGO do not have 12AA Certificate, they must ultimately pay taxes based on the applicable regular tax rates.
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What is 12A Registration?
12A registration enables Non-profit organizations to get excluded from paying taxes on their surplus. This ensures that the donations that these organizations receive are not taxed as part of their income. To receive this benefit, an organization must file application for 12A Certificate for Trust to the Income Tax Department.
What is 80G Registration?
If a charity has an 80G registration, as required by Section 80G of the Income Tax Act, donors may deduct their contributions from their taxes if the organization is a registered charity. By giving them tax benefits, it encourages individuals and companies to make donations to charitable organizations. For an organization to be eligible for 80G registration, 12A registration Certificate must first be held.
Provisional Registration of 12A & 80G:
Prior to amendment as per The Finance Act 2023, No distinguishment was made whether the new trust has already commenced its activities or not at the time of filing the application in Form 10A for 80G and 12A Registration. As a result, even a newly established fund or trust which has commenced its activities at the time of filing of an application was getting provisional approval of 80G And 12A registration for a period of three years compared to a regular trust who is getting approval for a period of five years.
The Finance Act 2023 amended provisions of Section 10(23C), Section 12A and Section 80G to allow a trust or institution which has commenced activities for direct final registration and/or approval without applying for provisional registration/approval.
Newly established fund or trust which has not commenced its activities at the time of filing of an application shall apply for approval in Form 10A for 80G and 12A Registration and provisional approval will be granted to such trust or fund.
Newly established fund or trust which has commenced its activities at the time of filing of an application shall apply for approval in Form No. 10AB and regular approval for a period of 5 years will be granted to such trust or fund after verification.
When should we apply for permanent 12A and 80G Registration after provisional registration?
The Provisional 80G and 12A Registration has to convert for permanent registration six months before it expires or within six months from the date it begins its activities, whichever comes first.
Eligibility of 12A and 80G Registration:
- It must be a non-profit organization or a trust.
- Charitable services must be provided by your organization.
- Annual audits of your organization’s accounts are required.
- The organization should not receive any money from a business or profession, and any
- Profits should not be stored aside for future investments or other uses.
- Prevent trustees or governing bodies from benefiting unduly.
Benefits of 80G And 12A Registration Certificate:
Benefits of 12A Registration Certificate:
- Eligibility for Government assistance: NGOs registered under 12A are able to apply for government assistance.
- Grants and Aid: NGOs may apply for grants and aid from both national and international organizations if they are registered under Section 12A.
- Continuity of Exemption: As long as an NGO adheres to the necessary laws, after it has 12A registration, it constantly enjoys tax exemption on its surplus income.
- Increases reputation: An NGO’s reputation and dependability in the eyes of donors, authorities, and other stakeholders are increased through 12A registration.
- Administrative Benefits: NGOs with 12A registration may be eligible for a variety of administrative advantages, including streamlined procedures for accepting funds from abroad and exemptions from some legal requirements.
Benefits of 80G Registration Certificate:
- Donor Attraction: By giving donors tax advantages for their contributions, 80G registration aids NGOs in attracting donors.
- Income Exemption for Donors: Donors can deduct the amount they’ve given from their overall taxable income, which relieves them of some of the burden.
- Increased Funding Potential: An NGO’s prospects of acquiring more funding and support are increased when it has an 80G registration, which increases its credibility and dependability.
- Wider Donor Base: The 80G Certificate for NGO broadens the possible donor base because people and corporations are more willing to give to NGOs that have this certification.
- Long-Term Support: Because donors can receive tax benefits on their contributions to an NGO with 80G registration, they are more likely to make recurring contributions to that organization.
- Funding for corporate social responsibility (CSR): Companies who want to meet their CSR responsibilities prefer to sponsor NGOs that have 80G registration since those organizations’ donations are acceptable to satisfy CSR criteria.
Which Forms are Used for 80G And 12A Registration?
When to use Form 10A:
For provisional registration/approval under sections 12AB/10(23C)/80G for new cases which has not commenced its activities yet.
When to use Form 10AB:
- The conversion of provisional registration to permanent registration.
- Renewal of existing 80G And 12A Registration 6 months before its expiry
- A new registration for objects that have been modified.
- Newly established trust which has commenced its activities
80G and 12A Registration Documents Required:
- Registration Certificate: For both 12A and 80G registration, a copy of the entity’s certificate of incorporation is needed.
- PAN Card: For entities registered as trusts, a copy of the trust deed is required, whilst for corporations, the Memorandum of Association (MOA) and Articles of Association (AOA) are necessary as part of the registration procedure.
- Trust Deed/MOA & AOA: Companies must submit their Memorandum of Association (MOA) and Articles of Association (AOA) as part of the registration process, whereas trusts must submit a copy of their trust deed.
- Audit Report: The 12A and 80G registration applications must be submitted with the entity’s three-year audit report.
- Objectives: The entity must specify its goals for obtaining 80G and 12G registration and ensure that they are in line with the guidelines in Sections 11 and 80G of the Income Tax Act.
- List of Trustees/Members: for trusts, a list of trustees and their contact information is required, whereas for corporations, a list of members and their information is required.
Validity of 80G And 12A Registration Certificate:
- Validity of The provisional registration is six months before it expires or within six months from the date it begins its activities, whichever comes first, after that it has to apply for permanent registration.
- While Permanent registration is valid for 5 years until Renewal of 80G and 12A Registration is done.
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Our experienced team is well-versed in 80G and 12A approval matters. Contact us for efficient and hassle-free assistance with your registration needs, so your organization can focus on its essential charitable work.