Registration under section 80G provides Income Tax benefits to the donor of the NGO. In contrast, registration under section 12A is for exemption of income tax for NGOs such as Society, Trust and Section-8 Company.
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Non-Profit Organizations play a vital role in India’s social and economic development. However, they do not have a stable source of income to generate their own revenues. They are majorly dependent on grants, donations, and other forms of unconditional contributions.
These contributions help them sustain their operations and achieve their objectives promptly. 12A and 80G Registrations are means by which the Government seeks to encourage such contributions to non-profit organizations. Let’s understand how!
Section 12A of the Income Tax Act contains the provisions determining applicability of Sections 11 and 12 on NGOs. Section 11 excludes certain kinds of income from the total taxable income in the previous financial year. Section 12 further clarifies that such income includes any voluntary contributions received as grants and donations for charitable and religious purposes.
Section 80G (1) allows certain kinds of contributions to be exempted while computing the total taxable income of an assessee. Clause (2) enlists all such contributions in detail. It includes any funds transferred to a non-profit entity which has taken the 12A Registration. The non-profit entity must be registered in India, and funds transferred must be solely used for charitable and religious purposes.
Section 12A provides for the registration of charitable or religious NGOs, allowing them to claim tax exemptions on their income from donations. Here are the key conditions that need to be fulfilled for obtaining Section 12A registration:
Section 80G provides for the registration of charitable or religious non-profit organisations, allowing their donors to claim tax exemptions on their donations made to such organisations.Here are the key conditions that need to be fulfilled for obtaining Section 80G registration:
1. Applicability of 12A Registration to Religious Trusts: 12A registration is applicable to Public Religious Trusts only, and not to trusts or NPOs established for private religious purposes. Religious purposes entail the advancement and propagation of a particular religion and its tenets.
2. Meaning and Scope of Activities for General Public Utility: Activities for general public utility does not involve activities carried out in the nature of trade, commerce, business unless such activity is carried out for the advancement of the object of general public utility itself. Also, the aggregate receipts from such activity or activities must not exceed 20% of the institution’s receipts in the previous financial year.
Completing the procedure for 12A and 80G registration online requires eligible NGOs to submit a set of documents establishing their existence as legally registered entities. Without the submission of these documents, the applications for 12A and 80G registrations may be deemed incomplete and get rejected by the concerned authorities.
Here’s a complete list of documents required for 12A and 80G registrations in India.
| No. | List of Documents Required for 12A and 80G Registration |
|---|---|
| 1. | Where the trust or institution is created under an instrument, a self-certified original copy of such instrument |
| 2. | Where the trust or institution is not created under an instrument, a self-certified document evidencing its creation |
| 3. | Self-certified Registration Certificate of the Institution, along with Memorandum of Association / Bye Laws, whichever applicable |
| 4. | FCRA Registration Certificate, if the entity is registered under FCRA |
| 5. | Two copies of the annual Accounts of the Trust or Institution for the last three financial years, if the application is filed later than the financial year during which the trust or institution is created. |
| 6. | If the total income without taking into account Sections 11 and 12 exemptions exceeds the amount of non-taxable income, an audit report of the previous year’s accounts by a Chartered Accountant has to be filed in Form 10 B, 1 month prior to the filing of Income Tax Returns under Section 139. |
| 7. | NGO Darpan ID |
As per the new changes introduced under Finance Acts of 2020 and 2021, Form 10A is now the primary application form for obtaining registrations under Sections 12A and 80G of the Income Tax Act. We have explained the new and updated 12A and 80G registration process online in the step wise guide below. If you face any difficulty in understanding, avail a free consultation from our experts.
Note: Older provisions for Registration under Section 12AA have been replaced by newer provisions under Section 12AB. So, every NGO previously registered under Section 12A, Section 12AA, and Section 80G will have to re-register under Section 12AB of the Act, effective from April 1, 2021.
To begin, decide on the legal framework for your NGO, choosing between a trust, society, or Section 8 company based on your state’s laws. Once you’ve determined the legal structure, formally register your organisation with the relevant authority, whether it’s the Registrar of Societies, Registrar of Companies, or other appropriate governing body.
Collect essential documents that will be needed for filing the 12A and 80G registration applications in form 10A. These documents generally include your organisation’s registration certificate, MOA / Bye Laws / Trust Deed, audited financial statements, FCRA Registration, NGO Darpan ID, and so on. These documents will serve as supporting evidence of your NGO’s existence and legitimacy.
Complete Form 10A, the official application form for seeking registration under Section 12A & 80G of the Income Tax Act. This form can be obtained from the Income Tax Department’s official website or the local Income Tax office. Ensure accurate and comprehensive details while filling out the form, including information about your organisation’s objectives, activities, and governing body members.
Submit the duly filled Form 10A along with the necessary documents to the Office of the Income Tax Commissioner or on the Income Tax Website. This submission marks the formal initiation of your 12A/80G registration process. Keep copies of all submitted documents for your records.
Upon receiving your application, the tax authority will review its contents to verify that your NGO aligns with the conditions for Section 12A/80G registrations. In some instances, they may conduct an inspection of your organisation’s activities and financial records to ensure compliance and authenticity.
Depending on the review and inspection outcomes, one of two scenarios will occur. If your application meets the requirements and passes scrutiny, the tax authority will grant your NGO registration under Section 12A/80G. On the other hand, if issues or discrepancies arise, your application could be rejected. In this case, you’ll have the opportunity to address concerns and respond accordingly.
Upon successful registration, you will receive an official registration certificate from the tax authority. This certificate confirms your NGO’s eligibility for tax exemption under Section 12A / 80G of the Income Tax Act. It’s a crucial document that establishes your organisation’s legal standing and allows you to avail of tax exemptions for your NGO as well as its donors.
The registrations granted for the first time under Sections 12A and 80G shall be provisional and shall be valid only for a period of three years. A renewal for this provisional registration needs to be applied either 6 months before the expiry of the validity or within 6 months of commencement of activities, whichever earlier. The renewed registrations will be granted for 5 years at a time.
Obtaining Section 12A and 80G registrations under the Income Tax Act can be a transformative step for charitable organisations and NGOs. These registrations not only signify official recognition from the Income Tax Department but also open doors to a host of advantages that propel the organisation’s mission. From fostering a culture of transparency and accountability to amplifying fundraising efforts, the impact and importance of 12A and 80G registration cannot be overstated. Our discussion below will give you some clear insights!
NGOs registered under Section 80G provide a significant incentive for donors, as contributions made to these organisations are eligible for tax deductions.
Both Section 12A and 80G registrations bestow a sense of credibility upon the organisations and ensure transparency for donors.
The availability of tax benefits encourages individuals and corporate entities to contribute more generously to NGOs. This, in turn, broadens the fundraising base of these organisations.
Many government bodies and agencies require NGOs to possess 12A and 80G registrations to be eligible for various assured grants and funding opportunities offered by them.
With the ability to offer tax benefits to donors, NGOs can establish sustainable sources of funding and plan to execute long-term projects with lasting impacts.
12A and 80G registrations necessitate the use of funds for charitable and religious activities only, as evident through its regularly maintained account books.
Seeking 12A and 80G registration consultant for your NGO? Look no further! We, at Setindiabiz, provide full assistance throughout the process. Our services extend to determining your organisation’s eligibility for these tax registrations, and assist you in filing the application with complete accuracy and adequate document support. You can avail a free consultation from one of our experts before you’re finally convinced!
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