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What is 12A and 80G Company?

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12A and 80G registrations are vital tax provisions under the Income Tax Act, 1961, for NGOs in India, providing key benefits to both organizations and their donors.

12A Registration: Grants tax exemption to NGOs on income used for charitable purposes, maximizing funds available for their activities by eliminating tax liabilities on surplus revenue from grants or donations.

80G Registration: Encourages donations by allowing donors to claim income tax deductions on contributions made to 12A-registered NGOs, reducing their taxable income and fostering greater philanthropic support.

These registrations are essential for NGOs to enhance financial sustainability and attract more donor participation.

Benefits

Tax Benefits for Donors

Enhanced Credibility

Increased Fundraising

Access to Government Grants

Long-Term Sustainability

Efficient Resource Utilization

Benefits of 12A and 80G Registrations

  • Tax Benefits for Donors: Encourages donations by offering tax deductions under 80G.
  • Enhanced Credibility: Official approval under 12A and 80G boosts trust among donors and partners.
  • Increased Fundraising: Tax incentives attract more individual and corporate donors, expanding the funding base.
  • Access to Government Grants: Enables eligibility for government funding and programs.
  • Long-Term Sustainability: Builds lasting donor relationships for steady funding and long-term projects.
  • Efficient Resource Utilization: Ensures funds are strictly used for charitable purposes with proper accountability.

Eligibility Criteria for 12A and 80G Registration

  • 12A Registration
    1. 12A registration is applicable to trusts, societies, or Section 8 companies for charitable or religious purposes (as per Section 2(15) of the Income Tax Act).
    2. Applicant must engage in activities like poverty relief, education, medical relief, or environmental preservation, without profit motives.
    3. Requires proof of registration as a trust, society, or Section 8 company.
    4. Income and assets must only be used for charitable or religious purposes.
    5. Maintain proper financial records and file annual tax returns on time.
    6. Must not engage in political activities.
  • 80G Registration
    1. Applicable to non-profits operating as registered trusts, societies, or Section 8 companies for charitable purposes.
    2. Requires prior 12A registration.
    3. Funds must be used strictly for charitable purposes.
    4. Benefits must be inclusive, serving society without bias toward any community or caste.
    5. Maintain accurate financial records for transparency and accountability.
    6. Religious trusts are eligible only if serving public interests, not private religious purposes.
    7. Commercial activities supporting charitable purposes should not exceed 20% of total receipts.

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