Benefits of NGO registration U/s 12A
Hemlata Khandelwal / 2022-02-23 01:40:12Which types of companies can apply for 80 G and 12 A company registration?
A non-profit organization or non-governmental organization (NGO), a charitable trust or a section 8 company, can apply for 80-G registration as well as obtain certification under section 12A. Both the certificates can be applied for together or it can be done separately. If an NGO wants to apply for both separately, in that case, it has to first apply for registration u/s 12A. Obtaining 12A certification is a prerequisite for applying for obtaining 80G registration as per the Income Tax Act, 1961.
In case the institution has jurisdiction, the application has to be filed with the Commissioner of Income Tax.
Which type of company's eligible to claim full exemption from Income tax?
Any business entity, which is not operating for profit, such as charitable trust, religious organization, section 8 company or NGO, is eligible to claim full exemption from income tax. The condition that it should be registered under section 12A. Therefore, it is important for all such NGO, Trust or Organization to be registered under Section 12A immediately after incorporation. If an NGO does not get the 12A certificate, it will have to pay income tax on the surplus during the year. Even if the NGO registration is done as a trust, whether it is registered as a society or a section 8 company, it has to obtain 12A certification to avail tax exemption.
Without it, your receipts will be entitled to normal tax rates and the beneficial exemptions available will leave you blank. It serves as valid proof for the existence and purposes of your NGO. Registration will also help you get grants from the government or organizations from abroad.
- Eligibility for 12A Certificate
- Charitable Trust, Religious Trust, Society, and Section 8 Company, formed to provide benefit to the public.
- Private or family trusts are not eligible.
Registration under section 12A:
It is a one time registration process. Before applying for exemption certificate under section 12A, the organization has to obtain NGO registration under Income Tax.
- For application, the duly filled Form 10A has to be submitted to the Commissioner of Income Tax.
What are the documents required for 12A registration?
The following documents need to be attached:
- List of names, addresses and PAN details of trustees/managers;
- Attested copy of the certificate of registration when the trust is established,
- A certified copy of the document (Trust Deed/MOA and AOA) which is a proof that the institution/trust exists and is registered,
- NOC required from landlord s
- NGO's PAN card copy,
- Address Proof for NGO, Electricity Bill / Tax Receipt on House Property / Water Bill.
Who will review the application?
Certification of Income Tax Act u/s 12A:
On receipt of the duly filled application, the same will be reviewed by the Commissioner of Taxes. On review, he may ask for additional information or documents to be submitted. If not satisfied, he can reject the application of an NGO.
Once the application and information are satisfactory, the Commissioner shall pass an order in writing registering the Trust/Institution under Section 12A of the Income Tax Act.
Note: NGO Registration, once completed, is valid for a lifetime.
What are the Benefits of NGO Registration under Section 12A?
The benefits of obtaining company registration under section 12A are as follows:
- The income received will be exempt from taxation.
- Funds used for charitable or religious purposes are called income applications. It is nothing but expenditure on charitable or religious purposes while computing the income of the trust.
- The organization can take advantage to accumulate or set aside income. Provided it does not exceed 15%.
- Accumulation of income, which is otherwise included in the form of income application in accordance with section 11(2), shall not be included in the total income.
- NGOs are entitled to receive grants and funding from various agencies, government as well as international. These agencies are assigned to provide grants to 12A registered NGOs.
- Receive benefits under the Foreign Contribution Regulation Act, 2010 or FCRA.
- The Finance Act of 2014 extended the benefit of registration to a trust, institution or a section-8 company that has been registered under section 12AA.
- 12A registration is a one-time registration. Once the company registration u/s 12A is done, it will remain active till the date of cancellation of registration. There is no need to renew the registration. Hence, these benefits can be claimed by the NGO as per the requirement.