Non-profit organizations play a crucial role in addressing social issues. However, to operate effectively and receive financial support, these organizations must obtain 12A and 80G certifications from the Income Tax Department.
Section 12A: Tax Exemption for the NGO
12A registration is applicable to charitable trusts, societies, and Section 8 companies. This registration allows organizations to claim absolute exemption from paying income tax on their surplus income, provided the funds are reinvested in their charitable activities.
Tax Exemption
The primary benefit is 100% exemption of income from tax. This enables NGOs to utilize their entire corpus effectively for their social causes.
Foreign Funding
Many foreign funding agencies and international organizations mandate 12A registration as a baseline criterion for providing grants to India.
Section 80G: Tax Deduction for the Donor
80G registration is a powerful tool to encourage philanthropy. It allows donors—both individuals and corporate businesses—who contribute to your NGO to claim a deduction of up to 50% or 100% on their donations while filing their own income tax returns.
Increased Donor Confidence
Organizations with 80G are deemed highly trustworthy by donors, as it assures them that their contributions are monitored and legally vetted.
Attracting CSR Funds
Many companies are actively involved in corporate social responsibility (CSR) activities. 80G registration makes NGOs eligible to receive massive CSR funds.
The Registration Process
- 1
Eligibility Check
Ensure your organization falls under the definition of charitable purposes as specified in Section 2(15) of the Income Tax Act.
- 2
Application Preparation
Prepare a copy of the trust deed/MOA, statement of accounts, PAN card, and a detailed description of activities carried out.
- 3
Form Submission (Form 10A)
Submit Form 10A to the Commissioner of Income Tax (Exemptions) having jurisdiction over your organization via the IT portal.
- 4
Review & Inspection
The authorities will thoroughly review your application and may conduct a physical inspection of your organization’s premises.
- 5
Approval and Registration
If satisfied, the tax authorities will grant 12A and 80G registration. It is usually valid for 5 years and must be renewed.