According to the Income Tax Act of 1961, there are some organisations that are eligible for tax exemptions. Tax exemptions are made available to organisations that do not operate for profit, such as Section 8 businesses, charitable trusts, and NGOs. Institutions formed in India that are not operating for profit are eligible for such exemptions under Sections 12A and 80G of the Income Tax Act, 1961. To be eligible for the exemptions, these organisations must register under Sections 12A and 80G and obtain certificates thereunder; otherwise, they will not be able to take use of the numerous advantages that would otherwise be provided after receiving these certificates.The institution must register as an NGO under the Income Tax Act by submitting Form 10A before it may apply for certificates under the aforementioned sections; only then will it be able to request tax exemptions.
Section 80G Registration
Section 80G Organizations that operate without a profit, such as NGOs, charity trusts, religious organisations, and Section 8 corporations, are granted registration under the Income Tax Act of 1961. This certificate’s main objective is to motivate donors to make gifts. Donors who make these donations are eligible to receive tax breaks. To qualify for the exemption, all they need to do is include the gift receipt, which should include the donor’s name, the date of the donation, and the organization’s PAN.
Section 12A Registration
Organizations working without a profit, such as NGOs, charity trusts, religious organisations, and Section 8 corporations, must register under Section 12A. Some organisations are qualified to receive tax exemptions on their surplus revenue after being properly registered under 12A. The certificate of an exemption received under certain circumstances has lifetime validity and requires only one registration. It is advised that NGOs and other non-profit organisations register under this section as soon as they are established in order to take advantage of the advantageous tax breaks.
Who can apply for 12A and 80G registration?
The following types of organizations can apply for 12A and 80G registration:
- Charitable trusts
- Registered societies
- Section 8 companies
Benefits of 12A and 80G registration
- Tax exemption: 12A registered organizations are exempt from paying income tax on their income. This can save the organization a significant amount of money.
- Donor benefits: Donors to 80G registered organizations can deduct their donations from their taxable income. This can encourage people to donate more to the organization.
- Credibility: 12A and 80G registration is a sign that the organization is credible and trustworthy. This can help the organization attract more donors and volunteers.
Documents required for 12A and 80G registration
- Trust deed/society registration certificate/section 8 company certificate
- Memorandum of Association and Articles of Association (for section 8 companies only)
- PAN card of the organization
- Bank account statement of the organization
- Audited accounts of the organization for the last three years
- List of trustees/members/directors of the organization
- List of activities carried out by the organization
Details required for 12A and 80G registration
- Name of the organization
- Address of the organization
- Contact details of the organization
- Type of organization (trust/society/section 8 company)
- Objectives of the organization
- Activities carried out by the organization
- Sources of income of the organization
- Utilization of funds by the organization
Process of registration for 12A & 80G
The process of registration for 12A and 80G is as follows:
- Download the application form from the website of the Income Tax Department.
- Fill out the application form and attach all the required documents.
- Submit the application form and documents to the Income Tax Department office in your jurisdiction.
- The Income Tax Department will review your application and documents. If everything is in order, they will issue you a 12A and 80G certificate.
Time duration to get the certificate
The time duration to get the 12A and 80G certificate varies depending on the workload of the Income Tax Department. It can take anywhere from a few weeks to a few months to get the certificate.
FAQs
How much deduction can I claim under Section 80G?
The deduction under Section 80G varies based on the type of charity and the percentage of the donation:
- 100% Deduction: Donations to certain institutions (like National Defence Fund, Prime Minister’s National Relief Fund, National Children’s Fund, etc.).
- 50% Deduction: Donations to other charitable institutions.
- The deduction is subject to conditions, and the amount is usually limited to 10% of your gross total income.
Do I need to submit any proof to claim deductions under Section 80G?
Yes, you must obtain a receipt or acknowledgment from the charity, which should include the organization’s registration number, donation amount, and the date of donation. Donations above ₹2,000 must be made through a cheque or electronic transfer to qualify for a deduction.