80G and 12A Registration An Overview

In India, 80G and 12A registration are considered relevant for non-profit organizations seeking healthy tax benefits. Indian NGOs strive to register for both to maximize the benefits for themselves and their donors.

80G Registration

Non-governmental organisations (NGOs) – trust, society or Section 8 Company run on funds received through different sources of donations. All NGOs are eligible to apply for 80G certification. 80G registration falls under the purview of section 80G of the Income Tax Act of 1961. It benefits the donors in part or full by exempting them from paying taxes on their donations made to a registered NGO.

12A Registration

All non-governmental organisations (NGOs) are engaged in social endeavours through charity work. While they run their daily operations through donations, they do sometimes earn income as per the law. However, NGOs that are not registered under Section 12A of the Income Tax Act of 1961 have to pay taxes. However, NGOs with 12A registration are exempt from paying taxes on their income.

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What are the Benefits of 80G and 12A Registration?

80G and 12A registration are known for building credibility and ensuring trust. The significant benefits of 12A registration for NGOs are:

• Income Tax Exemption – It exempts the NGOs from paying income tax on income received, helping them direct their funds to philanthropic causes.
• Grants – It makes the NGOs eligible for receiving grants from the government as well as national and international donors.
• One-Time Registration – It is a one-time registration process and needs no periodic renewal until the NGO remains functional.
• Accruing Wealth – It facilitates the NGOs to accrue some income for future operations not amounting to more than 15% of the funds received for charitable activities.
• Reduced Tax Liability – Accumulated income is not considered as the taxable income of the NGO, thereby reducing its tax liability.
• FCRA Benefits – NGOs with 12A certification are eligible to avail seamless foreign contributions.

80G registration is a pathway to reduction in the tax burden. The key benefits of 80G registration for NGOs are:

• Credibility – Boosts the credibility of the NGO, thereby attracting the confidence of the stakeholders, including the donors.
• Tax Benefits – 80G certifications facilitate donors to avail tax exemptions for the donations made to the NGO.
• Tax Exemption – All NGOs can avail tax exemptions for both the donors as well as the organisation.
• Funding Support – NGOs can apply for grants and receive additional funding from the government.
• Donor Support – Boosts transparency and strengthens donor confidence to attract more donor contributions through different channels.
• Reduced Tax Obligation for Donors – Donors donating to NGOs can use these certificates to reduce their tax burdens despite paying their regular taxes.
• Legal Identity – These certificates establish the legal identity of the NGOs, giving them access to legal documents required to apply for grants and loans.
• Foreign Contributions – NGOs with 80G certification can avail hassle-free foreign contributions.

Recent Update

As per the recent notification, all existing NGOs registered under Section 80G and 12A now have to re-register themselves under section 12A and 80G to avail tax exemptions. NGOs wanting to avail CSR Funding will now have to register Form CSR-1.

Recently Introduced Terms for Registration and Re-Registration under section 80G and 12A

• Income Tax department will issue Provisional Registration Certificate to freshly incorporated NGOs, Trusts registration, Societies, Section 8 Companies submitting an application for 80G and 12A Registrations.
• The issued 80G and 12A Certificates will expire after 3 years and thereafter need to be renewed.
• The Income Tax department will extend the validity of the registration for 5 years and thereafter will require renewal after every 5 years.