80G & 12A Registration
80G Registration comes under Section 80G of Income Tax Act and provides benefits to the donor of an NGO, whereas Section 12A Registration will assist an NGO to get an organization income exempted from Tax. Both 80G Registration and 12A Registration applies only to NGO’s and charitable organizations.
- Application drafting for Section 12A license
- Application drafting for 80 G exemption certificate
- Approval from Income tax commissioner
- End to end follow-up with tax authorities
- All india Service over 500+ CA/CS/CMA
Applicability of 80G Registration and 12A Registration
80G Registration and 12A Registration is applicable only to NGO’s and charitable organizations that:-
- Have no income being generated from the business
- Is either a charitable trust or a registered society
- Should not be using their assets or income for any other purpose than charity
- Maintains regular book of accounts of their receipts and expenses.
- The trustees or the governing body of the organization are not deriving any undue benefit from these funds
- They should not be working to benefit any particular caste or religion
- If there is business related income, there should be separate accounts maintained for it. The donations received by the NGO should not be used for such businesses.
12A and 80G Registration procedure typically need to be done by an NGO immediately after its incorporation.
What is 80G Certificate?
80G Certificate is issued to a non-profit organization or non-governmental organizations (NGO), a charitable trust or a Section 8 Company by the Income Tax Department. The objective behind the 80G certificate is to encourage more and more donors to donate funds to such organizations. The benefit that the donor avails by donating to such an NGO is that he gets tax exemption on 50% of his donation as the donor is allowed to deduct their donations from their Gross Total Income. To avail the tax exemption, the donor needs to attach the stamped receipt against the donation that is issued by the NGO – the receipt needs to include the name, date, and PAN of the organization.
80G Registration Process
80G Registration procedure consists of following steps:
- The application for 80G certificate needs to be submitted to the Commissioner of Income Tax (Exemption) in the jurisdictional area of the institution.
- Once the form and the required documents for 80G registration are submitted, an on-the-premise inspection is done by the Income Tax department.
- The officials might ask for additional documents and evidence that are required to be made available by the institution.
- On satisfactory verification and scrutinizing of documents and the office of the NGO, the 80G certificate is awarded to the institution by the Commissioner.
Validity: 80G Certificate valid for a lifetime.
Documents Required for 80G Registration
The documents required for 80G registration are as follows:
- Form 10G.
- Registration certificate and MoA in case of Section 8 companies and Societies; Trust Deed in case of a Trust.
- No objection certificate from the owner of the property where the registered office of the Institution is located.
- PAN card copy of the NGO.
- Copy of Utility Bills – Electricity bills, water bills or House Tax Receipt.
- Donor list along with their complete address and PAN.
- Book of Accounts & Income Tax Return documents, of last three years.
- List of welfare activities being carried out & the progress report for last three years.
- Detailed list of the board of trustees.
- Deed for Verification – Original RC, MoA or Trust Deed.
What is 12A Registration?
Now that we have covered 80G Registration we will discuss 12A registration and 12A registration process.
By virtue of 12A registration, Trusts and NGOs and other Section 8 companies enjoy exemption from paying income tax. NGOs are basically organizations that are meant for charitable and non-profit activities. However, they do have income and would be required to pay tax as per normal rates if not registered under section 12A of the Income Tax Act. The Section 12A of the IT Act, 1962 does not differentiate between charitable and religious Trusts. Hence 12A registration is applicable to both the kinds of organizations.
12A Registration Process
- The application needs to be done using Form 10A, as per Rule 17A of the Income Tax Act, 1962. The application needs to be filed with the Jurisdictional Commissioner of Income Tax (Exemptions).
- Once the Form and the documents have been received, the Commissioner verifies the authenticity of the activities of the organization. He can call for additional documents and information as deemed fit.
- On the satisfactory report, he will pass an order in writing for grant of 12A Registration. In case the Commissioner is not satisfied he will reject the application after which the applicant is given a fair chance to be heard.
12A Registration can be canceled at any point in time subject to proof that the activities of the organization being carried out is against the object of the institution or are not genuine or is benefitting a particular religion or caste or the funds are being invested in prohibited modes or income of the institution is being used for the benefit of specific persons.
Validity: 12A Registration valid for a lifetime.
Benefits of 12A Registration
When an applicant wants to establish an NGO then the first form of registration would be the 12A registration. This form of registration is an exemption which is applicable to all NGOs that have to apply for some form of exemption under the provisions of the Income Tax Act, 1961. The following are the benefits of 12A registration:
Government Schemes and Grants-
By taking the exemption certificate available under 12A an entity such as an NGO or Society can avail all forms of schemes and grants provided by the government. This would not be available if the NGO or society does not consider this form of registration.
By claiming this exemption the NGO or Society would get exempted from paying tax. For this purpose the NGO would have to furnish the 12A certificate to claim such exemption.
Proof of Existence-
Such certificate would be valid and legible proof of existence to the government that this form of entity is registered. Legal proof would be available for the entity to secure some form of grant or loans from the government.
Applicable to NGO and Societies-
Another thing is that this form of certificate would be applicable not only for NGOs; it would also be available for societies which are registered as per the requirement of the Societies registration Act.
Benefits of 80G Registration
After an NGO or society is registered as per the requirements under 12A they would also claim the benefits under section 80G of the Income Tax Act, 1961. The following benefits are available to an entity that is claiming this form of exemption:
Increase in Reputation-
Having 80G registration certificate would make the entity more reputed in the eyes of the public. This certificate enables the donors to secure some form of exemption and paying less tax when it comes to donating to the particular NGO. Hence this certificate is useful for the donor.
Having this certificate not only increases the reputation of the NGO or society but also increases the amount of donors. More donors would be able to claim tax exemptions under this system.
Donors can save tax-
Donors can utilise this certificate of the NGO to save tax while paying certain amount of tax to the respective government authorities.
Government are more likely to provide different forms of grants and related funding to NGO and societies having these certificates.
Documents Required for 12A Registration
The documents required for 12A registration are as follows:
- Form 10A.
- Documental evidence of the creation of the Trust or NGO – Trust Deed of a Trust; Registration Certificate and Memorandum of Association of a society; section 8 companies to submit a certificate of incorporation and copies of MoA and AoA of the company.
- Three-year bank account statement of the Trust.
- PAN card of the organization.
Frequently Asked Questions
What is 12A and 80G?
By 12A registration trusts and NGO enjoy exemption from paying taxes. 80G registration provides benefit to the donor of an NGO.
What is the difference between 12A and 80G?
80G Registration comes under section 80G of the Income Tax Act and provides benefit to the donor of an NGO whereas section 12A Registration will assist an NGO to get an organisation income exempted from tax.
How do I apply for 12A and 80G online?
You can apply for 12A and 80G online through professional tech based online legal services.
How much tax is exempt from 80G?
The various donations specified in section 80G are eligible for a deduction up to 100% or 50% without restrictions.
How is 80G deduction calculated?
For the purpose of calculation of the amount that is available as a deduction from gross total amount, we can classify the deductions as: deductions without limit and deductions subject to limit.
What is the limit for donation under 80G?
The various donations specified in section 80G are eligible for a deduction of up to either 100% or 50% with or without restrictions.
How do I submit 80G proof?
Certain tax deductions can be claimed by submitting proof of donations to your employer and in some other cases donations can be claimed by the individual while filing tax return.
Is TDS applicable on donations?
There is no section in chapter XVII B of IT Act that attracts TDS on donations.
How much cash donation can a trust accept?
Finance Act 2017 amended section 80G to provide that no deduction shall be allowed under section 80G in respect of donation of any sum exceeding Rs 2000 unless it is paid by any other mode.
Is money given to charity tax-deductible?
Section 80G of the IT Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income.
Who can apply for 12A registration?
12A registration applies to NGO’s and charitable organisations.
What are the documents required for 12A registration?
Form 10A, documental evidence of creation of trust or NGO, three year bank account statement of the trust.
How do I claim 80G exemption?
Not all donations made by an individual qualify for deductions under Section 80G. Donations made to foreign trusts and political parties are not covered under the ambit of this section and individuals cannot claim tax deductions for such donations.
Eligibility for 12A and 80G Registrations
- NGOs working as Public Charitable Trust or u/s 25 of the Companies Act, 1956 working ONLY for the public welfare are allowed for this provision.
- Donation as permitted u/s 80G is allowed for tax exemption
- NGO assets should ONLY be used for charitable purposes.
- NGOs should correctly maintain Books of Account of its expenditures and receipts.
NGO 80G registration can be cancelled in these cases:
- If NGO runs the promotion/benefit of religion/community/caste.
- If NGO receives funds/gifts from Political Parties/International sources.
- In case, NGO works as a commercial profit based unit.
- NO NGO member is permitted for making commercial profit based earning under NGO’s operational activities. In case, such income is received, it should be separated from NGO income. There should be separate Books of Accounts for such income.
- ANY misuse of the 80G provisions can result in the cancellation of this certificate.
Our Package is offering You:
- Drafting 12A Certificate Application
- Drafting 80G Certificate Application
- 12A and 80G Application Filing and Follow-up
Documentation for 12A and 80G Registrations
Essential Documents for both 12A and 80G Registrations
- Copy of PAN card of registered applicant NGO
- Certificate of Incorporation of NGO
- Trust Deed (in case, a Trust) or Memorandum of Understanding (MOA), Article of Association (AOA) of Company (in case, a Society/Section 8 Company)
- Complete list of welfare activities
Essential Documents ONLY for 12A Registration
- A duly filled in form 10 A
- Consecutive 3 years Financial Statements (in case, the NGO is active prior to the FY when application of registration is submitted)
Essential Documents ONLY for 80G Registration
- Address proof of Registered Office of NGO
- If you own the Registered Office, provide property papers.
- If the Registered Office is rented/leased, legal agreement of the same.
- Utility bills, such as, Electricity bill, Telephone/Mobile bill, etc.
- List of donors along with their address and PAN
- List of governing board of trustee’s members with their contact details
12A Registration Procedure
Note: ONLY when a NGO is registered, it can apply for 12A Registration.
STEP-1) Filing 10A Form
10A Form should be filled online furnished with relevant documents as per rule 17A of the Income Tax Act, 1962 to Jurisdictional Principal Commissioner/Income Tax Commissioner.
Commissioner will be checking the details of the application and may ask for additional documents/information, if required. Such queries should be responded properly otherwise may lead to rejection of application.
STEP-3) Issuance of 12A Certificate
You’ll be granted a lifetime 12A Certificate for your registered NGO once the Income Tax Commissioner is convinced with its purpose and validity.
Now, your establishment is legally approved NGO with the lifetime provision of tax exemption under Section 12A.
80G Registration Procedure
Note: 80G Registration is granted as per the Rule 11AA of Income Tax Rules, 1962.
STEP-1) Filing 10G Form
10G Form should be filled and signed properly online furnished with relevant documents to verify the Return of Income u/s 140 to the Principal Commissioner or Commissioner, as applicable.
The authorized official will conduct a thorough review of your application and may ask for additional documents/information, if required. Such queries should be responded properly otherwise may lead to rejection of application.
STEP-3) Issuance of 80G Certificate
Once satisfied with the standard, relevance and authenticity of your application, your NGO will be granted a lifetime 80G Certificate from the Income Tax Department of India.
Now, your establishment is legally approved NGO with the lifetime provision of tax exemption under Section 80G.