Section 80g and 12 A

Section 80G And Section 12AA

A NGO (trust or society) can obtain income tax exemption by registering and meeting certain additional requirements, but this registration provides no advantage to the people who make donations. Certain parts of the Income Tax Act of 1961 provide tax incentives to “donors.” To attract potential contributors, all NGOs should make use of these options. One of these sections is Section 80G. If an NGO is registered under section 80g, the individual or organization that donates to the NGO will be allowed a deduction of 50% of his or her taxable income. Only if an NGO is registered under sections 12AA and 80g is it eligible for government financing.

                                              Section 80G And Section 12AA

An 80g registration can also be applied for by a newly registered NGO. For 80g registration, the following documents are necessary. Sections 12a and 80g provide significant relief. If an NGO is registered under section 12aa, it does not have to pay tax for the rest of its life. Furthermore, corporations and ministries like to donate to those who have 12aa and 80g registration. As a result, they may deduct 50% of the contribution from their taxable income. In today’s rapidly evolving IT environment, an NGO’s website is critical for communicating the organization’s profile, activities, members, history, address, and social work. For documentation of their social activities, they should save their balance sheets, yearly reports, accounts, records, bills, vouchers, and pictures. This is quite useful, especially during the FCRA inquiry by the IB officials. The government may require registration or verification.

What is Section 12A?

Once the Trust Organization or NGO is formed, they must register under Section 12A of the Income Tax Act in order to claim an exemption under Sections 11 and 12 of the Act. Section 12A of the Income Tax Act of 1961 allows non-profit institutions such as Charitable Trusts, Non-Profit Organizations, Welfare Societies, Religious Institutions, and others to claim complete tax exemption. Non-profit organizations do not operate for profit, but rather for the benefit of individuals and society, and hence are non-profits. They are given tax exemptions since their job is deemed unselfish and they effectively do the task that the government should undertake.

Financial receipts or transactions of any non-profit trust or NGO that has not registered for 12A would be considered taxable. Such exemptions are not available to private or family trusts, therefore thus are unable to register under 12A.

 

 Eligibility under Section 12A?

The Department of Revenue establishes the qualifying requirements for Section 12A registration. Incorporated trusts, Section 8 businesses, and societies that give public benefit but do not make a profit are regarded as suitable for Section 12A registration, according to the requirements. To be eligible for the grant, trusts or organizations might be religious, welfare, or benevolent. Private trusts or societies, held only by a family, are not eligible for Section 12A registration. Once the trust or organization has been determined to be qualified, they must complete the 10A form via an online application. To file Form 10A, the applicant’s trust or organization must have a digital signature. The electronic verification code can also be used to file the 10A form electronically. Other crucial documentation for trusts, societies, and organizations is necessary when registering for Section 12A, in addition to the 12A application form.

How to do filing of the Form 10A

Along with the relevant papers, trusts, societies, and NGOs can use the online site to file Form 10A. The Internal Revenue Service has established a separate internet platform for tax forms. The applicant must first access the online e-filing site and then select the submit/return forms button. The applicant should create a username and password before logging into the site. Sections pick the form 10A and the assessment year and submission mode on the form. The applicant can then fill out the application for further processing using the ‘prepare and submit online’ button. Following the completion of the online application form, the income tax commissioner will conduct an examination and, if necessary, request the needed documents. The trust’s registration is valid for the rest of its life. Unless there are certain changes to the rule, trusts and NGOs do not need to renew their registration.

 

 The recent amendments under Section 12A

Section 12A, on the other hand, has undergone some recent changes.

  • The amount paid to any other trust or organization that is registered under Section 12AA will not be deemed a religious or charitable application of income.
  • For trusts and organizations registered under Section 12A, corpus donations are not regarded as an application of income.
  • The second amendment provides that if a trust or organization that has been registered under Section 12A has made changes that would cause it to no longer comply with the registration standards, it must apply for a new registration within thirty days of making the changes.
  • The following amendment provides that if a person obtains property from a trust or organization without payment, the value of the property is taxed under the ‘income from other sources’ heading.
  • This paragraph in Section 56 will not apply to any property or cash obtained from a foundation, university, institution, or hospital, or from Section 12A registered trusts. The government has set a maximum of Rs 2,000 for tax deductions made through donations in order to promote a cashless economy and habits. It indicates that if a contribution exceeds Rs. 2,000 and is made by a method other than cash, no deduction would be permitted under Section 80G. The limit was Rs. 10,000 before the modification.

The income tax department will provide major benefits to trusts, societies, and NGOs that are eligible and have registered for the Section 12A income tax exemption. Then the revenue spent on charity, religious reasons, and the general welfare of society will be examined. Section 12A-registered organizations will be eligible for a variety of government incentives that will assist them in contributing to social welfare.

 

 

Condition for registration u/s 80g :

The following requirements must be completed in order to receive permission under section 80G:

  1. i) The NGO must not have any non-exempt revenue, like profits from a business. If the NGO earns money as any means of side business, it should have separate books of accounts and should not redirect donations received for that reason.
  1. ii) There must be no provision in the NGO’s bylaws or aims stating the organization to invest its income or assets for purposes other than charitable ones.

iii) The NGO is not operating for the benefit of a certain religion or caste group.

  1. iv) The NGO keeps track of its expenses and income regularly.

(v) The NGOs should be properly registered pursuant to Section 8 of the Companies Act 2013 or any similar legislation, or under the Societies Registration Act 1860.

 

Benefits of registration u/s 80g :

Donors are allowed to receive benefits up to a certain ceiling. Under section 80G, a deduction may not exceed 10 % of the Gross Total Earnings (lowered by earnings from which no income tax is payable under this Act and by earnings from which a tax deduction is allowed under another arrangement ), so a deduction in excess of 10 % of Gross Total Earnings will not be allowed. 

 When calculating an assessee’s overall income and determining the deductible amount under section 80G, the total of the sums given must first be determined. 50 percent of such donations must be discovered, and they must be limited to 10% of gross total revenue. If the undesired accounts for more than 10% of total profits, it must be disregarded. Section 80G allows individuals and businesses to deduct 50% of their taxable income from charitable contributions. There is a common misconception that the tax benefit under section 80G is 50%, however, this is not the case. A deduction of 50% of the donation made from gross income is allowed, and tax is calculated as a result.

Benefits of Registration u/s 12AA :

The money used for charity or religious purposes will be regarded an application of income, which means that charitable or religious spending will be recognized for calculating the trust’s income.

2) There will be the option of saving or setting away up to 15% of one’s income for charity or religious reasons.

3) The total income does not include the accumulation of revenue, which is regarded to constitute the application of income under section 11(2).

4) Non-governmental organizations (NGOs) get a variety of subsidies from the government and other organizations. They are eligible for grants and financial assistance from a variety of organizations. These organizations often give funds to 12A certified non-profits.

5) The advantage of registering under Section 80G. NGO’s must apply for Section 80G registration individually.

It’s vital to remember that just because a company is registered under section 12A doesn’t ensure it’ll get section 80G certification. i.e., section 12A registration does not imply automatic acceptance under section 80G. Only charitable trusts or institutions are covered under Section 80G. It does not apply to religious organizations or trusts.

6) There is a benefit in registering with the FCRA. NGO’s seeking foreign funds must register with the Ministry of Home Affairs under the Foreign Contribution Regulation Act (FCRA).

7) The Finance Act of 2014 has extended the registration advantages to previous years as well. These advantages have been extended to trusts or institutions that have been granted registration under section 12AA.

The benefits of Sections 11 and 12 will apply to trusts or institutions for any outstanding assessments on the date of registration, provided that the Trust’s aims and activities in previous years claimed are the same as those on which the registration was granted.

Furthermore, the Assessing Officer shall take no action under section 147 in the case of such trust or institution for any assessment year before the aforementioned assessment year solely for non-registration of such trust or institution for the said assessment year.

The following advantages would not be accessible if a trust or institution filed for registration at any time and was denied under section 12AA, or if a previously granted registration was revoked.

8) Section 12A registration is a one-time registration. Once the trust has been given registration, it will remain valid until the registration is canceled. There are no provisions that need registration to be renewed. As a result, NGOs can enjoy the benefits of registering for the rest of their lives.

For approval under Section 80g of the Income Tax Act 1961, the following papers are required: 

  1. A copy of the NGO’s registration certificate and bye-laws.
  2. Copies of detailed activity reports dating back to the company’s 3. Formation or the previous three years, whichever is shorter.
  3. Copies of the institution’s/audited NGO’s accounts dating back to its establishment or the previous three years, whichever is shorter.

a copy of the NGO’s Pan Card

  1. Bank Statement with details of the NGO’s members (Complete KYC).

 

With the results of the 1st of October 2009, a trust is not necessary to apply for renewal of an 80G certificate if it is valid on the 1st of October 2010 or until a later date, unless the division specifically requests it. As a result, if the exact same certification is valid, the old 80G certification will stay valid.

 

 

How long does it take for an NGO to receive an 80g and 12aa registration? 

Registration might take up to 1.5 months from the day the NGO submits all of the necessary paperwork.

The procedure for NGO/ Charitable Trust/ Institution registration under Sections 12A, 12AA, and 80G, which would enable NGO/ Charitable Trust/ Institution to benefit from income tax exemptions.

A non-governmental organization (NGO) is a group that is neither affiliated with a government nor a for-profit corporation. Governments, foundations, enterprises, and private individuals may support NGOs, which are usually founded by regular citizens. Non-governmental organizations (NGOs) are a broad set of organizations that participate in a wide variety of activities and assume various forms in different regions of the world. Some may be designated as charity organizations, while others may be eligible for tax exemption based on the acknowledgment of social goals. Others might be shills for political, religious, or other special interest groups.

In India, NGO/Charitable Trusts can take advantage of many tax exemption benefits. NGO’s receive numerous tax exemption privileges with relation to their income/donation under Section 11 of the Income Tax Act of 1961, including:

  1. Voluntary contributions/donations made with an express request that they should form part
  2. of the trust corpus are entirely exempted; 2.15% of income/donation is blindly exempted whether or not the money is employed for a charitable purpose.
  3. A deduction will be given to the donor of an NGO for the gift made to that NGO, and there are many more.

To be eligible for these advantages, the NGO/charitable trust must register with the income tax department under sections 12A, 12AA, and 80G of the Income Tax Act of 1961.

The question now is, “How do I register?”

As a result, the following is the answer to this how:-

The initial step Apply for a PAN card to demonstrate your trustworthiness to the Income Tax Department.

The next step is to For applying for registration u/s 12A & 80G (both applications can be applied together or separately), following documents are required: –

  • Form – 10A for registration u/s 12A registration; dully filled in Form – 10A for registration u/s 12A registration;
  • Completed Form – 10G for registration under Section 80G;
  • Certificate of Registration and Memorandum of Agreement/Trust Deed (two copies – self-attested by NGO leader);
  • Landlord’s NOC letter (if the registered office is rented);
  • A copy of the NGO’s PAN card;
  • Photocopy of the Electricity Bill/House Tax Receipt/Water Bill
  • A brief description of the trust’s operations, as well as proof of welfare activities carried out, and a progress report for the previous three years;
  • Books of Accounts, Balance Sheet, and ITR (where applicable) for the previous three years or from start;
  • A list of donors, including their address and PAN (if applicable);
  • A list of members of the governing body/board of trustees, together with their contact information and a copy of their PAN;
  • Verification of the original RC and MOA / Trust Deed (The same will be done).
  • Affidavit/undertaking from the head of the NGO.

Third, the responsible person must send the above papers, along with a covering letter, to the Commissioner of Income Tax in the jurisdiction of the NGO.

In 2-3 months after applying, the NGO will get a notification from the Income Tax Department requesting explanations.

Fifth Step The responsible person of the NGO will file a reply to the notification, along with any required papers, to the Income Tax Departments.

Exemption Certificates will be given as the last step.

 Conclusion

A few non-profit organizations benefit from Section 12A, which allows them to be tax-exempt. This statute applies to trusts and organizations that do not make a profit from their operations. To file the form under this part, certain papers are necessary. However, once the form has been completed and the required papers have been confirmed, the registration is valid for life. Under this part of the Income Tax Act, charitable trusts and organizations, as well as individuals who contribute up to 50% of their income, can profit. According to the Government of India, all registered organizations under this clause must continue to work for the benefit of the country.

 

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