In India, tax exemptions and credibility are essential for NGOs and charitable institutions to function effectively and attract funding. To achieve this, obtaining 12A and 80G registration under the Income Tax Act is crucial. These certifications not only provide tax relief to NGOs but also encourage donors to contribute by offering them tax deductions.
Whether you’re running a trust, a society, or a Section 8 company, securing 12A and 80G registration is a major step toward building a compliant and credible non-profit organisation. This article explains everything you need to know — from eligibility and benefits to the registration process and compliance requirements — followed by a short section on how PSR Compliance can help.
What Are 12A and 80G Registrations?
Section 12A Registration allows a non-profit organisation (trust, society, or Section 8 company) to obtain exemption from income tax on its surplus income, provided it is used solely for charitable purposes.
Section 80G Registration enables donors to claim deductions on the donations they make to the NGO, effectively reducing their taxable income. This dual advantage — tax exemption for NGOs and tax benefit for donors — helps both the organisation and its supporters.
Together, these registrations are vital for any NGO aiming to operate transparently, attract more funds, and comply with the Indian tax laws for charitable institutions.
Why 12A and 80G Registrations Are Important
There are several compelling reasons why NGOs in India must obtain these registrations:
- Tax Exemption for NGOs: Income generated through charitable activities becomes exempt from income tax once 12A registration is approved. This allows NGOs to use their funds more efficiently.
- Tax Benefits for Donors: Donors contributing to an NGO with valid 80G registration can claim deductions (usually 50% or 100% of the donated amount) on their taxable income.
- Enhanced Credibility: Having 12A and 80G registrations signals that an NGO is legally recognised and compliant with tax regulations, which builds trust among donors and funding agencies.
- Eligibility for CSR and Government Funding: Many corporate CSR programs and government grants are available only to NGOs that hold valid 12A and 80G certificates.
- Increased Fundraising Opportunities: Donors are more inclined to contribute when their donations are eligible for tax deductions.
In short, 12A and 80G registration help NGOs sustain their activities, attract more funding, and maintain financial transparency.
Eligibility for 12A and 80G Registration
Not every organisation qualifies automatically. To apply for these registrations, an entity must meet the following eligibility criteria:
- The organisation must be registered as a trust, society, or Section 8 company.
- The activities and objectives must be charitable in nature, such as education, health, relief of the poor, environmental conservation, or social welfare.
- The NGO must not operate for profit and should use its funds solely for charitable purposes.
- Proper books of accounts and records must be maintained.
- The organisation must first obtain 12A registration, and only then can it apply for 80G registration.
Meeting these basic conditions is the first step toward securing the benefits of tax exemptions.
Documents Required for 12A and 80G Registration
To obtain 12A and 80G registration, NGOs must submit a detailed application along with supporting documents. Commonly required documents include:
- Copy of the Trust Deed or Memorandum of Association and Articles of Association (for societies or Section 8 companies).
- Registration certificate of the organisation.
- PAN card of the NGO.
- Proof of registered office address and a No Objection Certificate (NOC) from the property owner.
- Details of the trustees, governing body members, or directors.
- Bank account statement of the organisation.
- Past audited financial statements (if applicable).
- A brief report of activities and achievements since formation.
- Form 10A (for 12A registration) and Form 10G (for 80G registration).
All documents should be accurate, properly attested, and uploaded as per the prescribed format to ensure smooth processing.
Step-by-Step Process for 12A & 80G Registration
Obtaining these registrations involves several procedural steps, which can vary slightly depending on the structure of the NGO. Here’s a simplified guide:
Step 1: Ensure Legal Registration of the NGO
Before applying, the NGO must be legally registered under the appropriate law — the Indian Trusts Act, Societies Registration Act, or Companies Act (as a Section 8 company).
Step 2: Prepare the Application
The NGO must apply online through the Income Tax Department portal using Form 10A for 12A registration. All supporting documents should be uploaded in digital format.
Step 3: Submission and Review
After submission, the Commissioner of Income Tax (Exemptions) reviews the application. Additional documents or clarifications may be requested if needed.
Step 4: Issue of 12A Certificate
Once the Commissioner is satisfied with the application, a 12A Registration Certificate is issued. This provides tax exemption to the NGO.
Step 5: Apply for 80G Registration
After obtaining 12A registration, the NGO can apply for 80G registration by submitting Form 10G online, along with supporting documents.
Step 6: Verification and Approval
The tax authority reviews the details and, upon satisfaction, grants 80G certification. The certificate includes a unique registration number, which allows donors to claim tax benefits.
Step 7: Post-Registration Compliance
After registration, the NGO must maintain proper accounts, file income tax returns, and comply with all reporting requirements to continue enjoying the benefits.
Validity and Renewal of Registration
Under the updated tax regulations, 12A and 80G registrations are no longer valid for a lifetime. They are generally granted for a period of five years and must be renewed periodically.
The NGO must apply for renewal at least six months before the expiry date. Failure to renew may lead to suspension or cancellation of the registration, resulting in the loss of tax benefits.
Timely renewal and compliance with filing requirements (such as annual returns and audits) are therefore essential to retain these privileges.
Benefits of 12A and 80G Registration
Tax Exemption for NGOs: Income used for charitable purposes is exempt from taxation.
Tax Deduction for Donors: Donors can claim deductions of up to 50% or 100% of the donated amount, depending on the nature of the organisation.
Increased Funding Opportunities: Registered NGOs attract more donors and qualify for CSR funds and international grants.
Improved Credibility: Registration enhances transparency, accountability, and trust among stakeholders.
Financial Sustainability: Tax exemptions allow NGOs to retain more funds for their activities.
Long-Term Growth: Registered organisations are more likely to attract recurring donors and institutional partnerships.
Key Considerations and Best Practices
- Ensure Charitable Objectives: The organisation’s activities must strictly align with its stated charitable purposes.
- Maintain Proper Accounts: Keep accurate records of income, expenditure, and donations.
- Avoid Commercial Activities: The NGO should not engage in profit-making ventures unrelated to its objectives.
- Follow Compliance Rules: File annual returns and conduct regular audits.
- Renew Registrations on Time: Stay aware of the expiry date and revalidate well in advance.
- Issue Donation Receipts Properly: Provide donors with valid receipts containing your NGO’s 80G details for their tax claims.
- Stay Updated with Laws: Income tax regulations for NGOs may change; staying informed ensures continued compliance.
By following these practices, NGOs can maintain credibility, attract donors, and ensure uninterrupted access to tax benefits.
How PSR Compliance Can Help
The process of obtaining 12A and 80G registration can be complex, especially for new NGOs unfamiliar with legal procedures. PSR Compliance simplifies this journey by providing end-to-end assistance — from document preparation to successful registration and post-compliance support.
Their experienced professionals guide NGOs through:
- Choosing the correct structure (trust, society, or Section 8 company).
- Drafting compliant constitutional documents and verifying legal eligibility.
- Preparing and filing Forms 10A and 10G accurately.
- Managing interactions with the Income Tax Department and resolving queries.
- Handling renewal, revalidation, and ongoing compliance support.
By partnering with PSR Compliance, NGOs save time, reduce errors, and ensure a smooth approval process — allowing them to focus on their real mission: making a positive social impact.
For more information Visit : https://www.psrcompliance.com/12a-and-80g-registration
Comments