12 A & 80 G registration for NGOs

Registering an NGO in India has many advantages. The most important one are the rebates in income tax under two major sections – the 80G and 12A.

Most of us would agree with the sentiments of Einstein on understanding Income tax. We have tried to simplify here on how the rebates work,

12 A Registration

The first step an NGO should do is get an exemption certificate – 12 A registration. This helps in getting a rebate on tax. The 12 A registration will help you in seeking grants from government or organizations abroad, as it can be shown as a proof of the existence and purposes of your NGO. Whether your NGO is registered as a trust, society or a not-for-profit company, you have to get a 12A certification to avail tax exemption.

Registration under 80G

Once the first step of registering your NGO under section 12 A is complete, you can seek to register under 80G. This would help the donor, who is donating money to your organization can avail tax benefits based on this registration number. Only an NGO registered under both 12A and 80G is eligible for availing government funding. 80 G certificate also helps you bring in foreign contributions.

The registration process may take a few months, it is a lifetime registration with no requirement for renewals.

Applying for 80G Certificate

To apply for an 80G certificate, the organisation must have a 12A registration. Only NGOs and non-profitable institutions with a 12A certificate are eligible for 80G certification.

To get an 80G certificate, the organisation has to fill in Form 10G and attach the activity report for the past one to three years, with an audited statement for the past three years, or even from the date of establishment in certain cases. All the relevant forms are available on the income tax official website. The certificate is offered after your application is scrutinised & once an officer visits your organization for an inspection.

Registration of 12 A and 80 G certificate

Eligibility for 80G Certification

Not all NGOs or trusts are eligible for 80G certification. There are certain rules which need to be followed to obtain it. Here are the details under which the government can reject your claim for an 80G certification.

Separate business from charity

If an NGO is involved in any business or financial transaction apart from the donations,they have to be segregated.If not, the 80G certification request will be rejected.

Misuse of funds

There should be no misuse of funds for any other purpose, even if it is for the organization.

No Religious Activity

An NGO/Trust should not be involved in any religious preaching or they cannot be operated exclusively for a particular caste or creed.

Proper Accounting

Clear accounting of all transactions should be maintained right from the start and must be submitted as proof while applying for 80G. These documents will be scrutinised thoroughly before 80G certification is issued.

Tax Benefits to the Organisation

The 80 G certification provides tax exemption for the donors, which encourages them to donate to an organization, as well as offers tax benefits to the NGOs. The certification provides tax benefits of 10 to 50% of the total amount donated.

The institution can get an exemption of 10% for the gross income earned through donations and contributions. The Income Tax Department has the power to approve or reject such requests upon disqualification of the NGO or any dissatisfaction found by the department towards the organization’s activities.

Requirements for 80G certificate

  • If a non-profit organisation is undertaking any business, it has to maintain a separate account and should not mix the donations they receive for a social cause.
  • Other than the charitable cause, the organisation or its bylaws should not represent any other cause. None of the donations can be spent toward anything but the charitable cause.
  • The organisation shall not be able to apply for 80G if it supports religion-based, caste- or creed-based activities.
  • The organisation should be registered under the Societies Registration Act, 1860, or registered under section 25 of the Companies Act, 1956.

However, the Income Tax Department has the power to approve or reject such approval upon disqualification of the non-profit organisation or dissatisfaction found by the department towards the non-profit organisation activities.

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