12A and 80G Registration

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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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What is 12A and 80G Registration?

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!

12A Registration: 12A registration is obtained by NGOs under Section 12A of the Income Tax Act, 1961. It provides tax exemption to these organisations on the income they earn from grants, donations, and other forms of unconditional contributions. The registration is mandatory for all NGOs willing to avail the benefits of Section 12A.
80G Registration: 80G registration is obtained by NGOs to enable their donors to claim tax deductions on contributions they make to these organisations. The purpose of 80G registration is to encourage more and more donations for NGOs to support their welfare activities. This registration is voluntary and can be obtained only after 12A registration.

Section 12A of the Income Tax Act

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 of the Income Tax Act

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.

Eligibility for 12A and 80G Registration

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:

Nature of the Organization: 12 A Registration is applicable to trusts or institutions established wholly for charitable or religious purposes only. Charitable purposes are defined under Section 2(15) of the Income Tax Act as relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife), preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. The organisation's activities must be directed towards these purposes.

Charitable Activities: The organisation must be engaged in activities that fulfil its charitable objectives. These activities should not be aimed at generating profits for the benefit of any particular individual or group.

Registration: The organisation should be registered as a trust or a society under the appropriate laws. Alternatively, if it is a Section 8 company, it must be constituted under the Companies Act, 2013. Proof of their constitution needs to be submitted as part of the application for 12A registration.

Utilisation of Income: The organisation should not apply its income or assets, directly or indirectly, for the benefit of its members or any other specific individuals. The income should be utilised solely for charitable or religious purposes.

Maintenance of Books and Accounts: The organisation is required to maintain proper books of accounts and other relevant documents to reflect its income, expenses, and activities.

Regular Filing of Returns: The organisation must file its annual income tax returns under section 139 of the income tax act in a timely manner, even if it's eligible for exemption. This is necessary to maintain its tax-exempt status.

No Political Activities: The organisation should not engage in any political activities or support any political party or candidate. Engaging in political activities can lead to the cancellation of 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:

Nature of Organisation: 80G Registration is only applicable to non-profit organisations like registered trusts, societies, and section 8 companies established for charitable or religious purposes. These purposes must be adhered to the public and not to any private individual or group of individuals. Refer to the meaning of Charitable purposes under Section 2(15).

Organisation must be Registered under Section 12A: The income of organisations seeking 80G registration must be tax exempted under Sections 11 and 12 of the Income Tax Act. For this the organisation must possess the 12A registration certificate.

No Non-Charitable Use of Income: The constitution or governing rules of the institution or fund should explicitly restrict the use of its income and assets. This restriction ensures that the funds generated through charitable activities are dedicated solely to those activities.

Non-Exclusivity of Beneficiaries: For an institution to be eligible for Section 80G registration, it should not be established solely for the benefit of a particular religious community or caste. This condition is in place to ensure that the benefits of charitable activities are spread across a broader spectrum of society, rather than being limited to a specific group.

Regular Accounting: Organisations seeking 80G registration are required to maintain proper and regular accounts of their financial transactions. This practice is fundamental to demonstrating transparency and accountability in the use of funds. By maintaining comprehensive records of income received and expenditures incurred, the organisation provides a clear overview of its financial activities.

Note:

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.
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.

Documents Required for 12A & 80G Registrations

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

How to Get 12A and 80G Registration?

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.

Step-1: NGO Formation and Registration

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.

Step-2: Document Collection

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.

Step-3: Application Preparation

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.

Step-4: Application Submission

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.

Step-5: Review and Inspection

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.

Step-6: Registration Decision

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.

Step-7: Registration Intimation

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.

What is the Validity of 12A and 80G Certificates?

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.

Benefits of 12A and 80G Registrations

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!

Tax Exemptions for Donors

NGOs registered under Section 80G provide a significant incentive for donors, as contributions made to these organisations are eligible for tax deductions.

Enhanced Credibility and Trust

Both Section 12A and 80G registrations bestow a sense of credibility upon the organisations and ensure transparency for donors.

Increased Fundraising Potential

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.

Access to Government Grants

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.

Long-Term Sustainability

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.

Efficient Utilisation of Resources

12A and 80G registrations necessitate the use of funds for charitable and religious activities only, as evident through its regularly maintained account books.

Get Expert Assistance for 12A & 80G Registrations!

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!

Frequently Asked Questions

Can an organisation with business income apply for 12A and 80G registration?

Yes, an organisation with business income can apply for 80G registration, provided it maintains separate accounts for business activities, ensures that donations aren’t used for business, and issues certificates to donors confirming the same.

1. What is Section 12A registration?

Section 12A registration is a registration applicable for registered non-profit institutions like trusts, societies, and section 8 companies established in India wholly for charitable and religious purposes only. The registration allows them to claim tax exemption on the income they receive in the form of grants and donations, provided they are used for charitable and religious purposes in India only.

2. Who can apply for Section 12A registration?

Any registered non-profit entity like trust, society, or section 8 company set up wholly for charitable and religious purposes in India can apply for 12A registration. However, as far as trusts are concerned, the registration is applicable only to public charitable and religious trusts and not to private trusts.

3. Can an NGO avail both 12A and 80G registrations simultaneously?

No, 80G registration can only be obtained after the concerned institution has obtained the 12A registration.

4. What are the key benefits of 80G registration for donors?

Donors can avail tax deductions on their taxable income when contributing to NGOs with 80G registration, making it an attractive incentive for supporting charitable causes.

5. How does 80G registration enhance an NGO's fundraising efforts?

80G registration encourages individuals and businesses to contribute more generously owing to tax benefits received on such contributions. This expands the NGO’s fundraising potential and enables it to undertake larger and more impactful projects.

6. Can any specific sectors or activities benefit from Section 12A and 80G registrations?

The registrations apply to a wide range of charitable purposes, including education, healthcare, poverty alleviation, and more. Both charitable and religious organisations can benefit, but they must meet specific eligibility criteria.

7. What is the new process of Section 12A and 80G registrations?

The process for 12A and 80G registrations have been revised under Section 12AB of the Income Tax Act. As per the new process, every existing NGO registered under 12A and 80G of the Act will have to re-register under Section 12AB in Form 10A. Form 10A is the new form for 12A and 80G registrations and has replaced the old forms, form 10, and form 10G.

8. Can organisations generating revenue apply for 12A and 80G registration?

Yes, an organisation generating revenue can apply for 80G registration, provided it maintains separate accounts for business activities, ensures that donations aren’t used for business, and issues certificates to donors confirming the same.

9. What is 12A and 80G registration fees?

No government fees are charged for 12A and 80G registration. You will only have to pay our professional fees. Request our full quotation here.