An NGO can avail income tax exemption by getting itself registered section 80G and 12A of the Income Tax Act. 1961. The organization, that is not operating for profits, e.g., charitable trust, religious organization, Section 8 company or Trust or Society or NGO, is eligible to claim a full exemption from Income Tax. Section 12A of the Income Tax Act, 1961, is a onetime tax exemption provided to trusts, society and Section 8 companies. Organizations holding a registration under section 12A are exempted from paying taxes on their surplus income. The condition being that these must be registered under Section 12A of Income Tax Act, 1961. And 80G is a certificate that exempts you part or fully from paying taxes, if you have made donations to charitable trusts or section 8 company or non-profit organizations that are registered to offer you exemptions from taxes. 12A & 80G Registration are recommendable for all NGOs, whether a Trust, Society, or a Section 8 Company. An NGO with 12A Registration can claim exemption from the Income Tax Department. And if an NGO gets itself registered under section 80G then the person or the organization making a donation to the NGO will get a deduction of 50% from his taxable income. To avail the tax exemption, the donor needs to attach the stamped receipt against the donation that is issued by the NGO. Both applications can be applied together or it can also be applied separately also. If some NGOs is willing to apply both applications separately, then application for registration u/s 12A will be applied first.
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Eligibility For 12A & 80G Certificate
1. The applicant can only be made by a public charitable trust, registered section-8 Company, registered society, recognized educational institution or an institution funded by the Government.
2. A charitable trust or religions trust or society registered under societies registration Act, 1860 or section 8 company registered under the Companies Act, 2013 or section 25 company registered under Companies Act, 1956.
3. The memorandum or bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes other than charitable.
4. To apply for an 80G certificate, however, the organization must first have a 12A certificate.
5. Applicant of the certificate must not represent any religion based or caste and creeds-based activity.
6. The applicant should have maintained the appropriate annual returns, accounting and book keeping before applying for the certificate.
Benefits of 12A & 80G Registration
Tax Benefits
Under the Income Tax Act, 1961, non-profit entities such as charitable trusts, religious organizations, NGOs which are registered under Section 12A are eligible to claim full exemption from income tax.
Governmental Grants
The Center or State government proving donation to the registered NGOs from time to time for benefits of Society and only an NGO with both 12A and 80G registration is eligible for government funding.
Tax Benefits to Donor
Section 80G of the Income Tax Act’1961 provides deduction while computing the total income in the hands of donor. It provides deduction in respect of donations to certain funds, charitable institutions, etc.
Foreign Contributions
Benefit in FCRA registration. NGO’s seeking foreign contributions have to obtain FCRA registration from the Ministry of Home Affairs.
One Time Registration
Registration under section 12A is one-time registration. Once the registration is granted to the trust, it will be hold good till the cancellation of registration.
Documents required
- PAN Card- Self attested PAN Card issued by I.T. Department- Aadhar Card- Self attested Aadhar Card issued by UIDAI- Id Proof
- Self attested id proof (Voter ID/DL/Passport)- Address Proof
- One month Bank statement/ telephone bill- Photographs
- A latest passport-size colour photographs- Utility Bill
- Latest electricity bill with NOC/ Rent Agreement
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