80G Registration and 12A Registration is applicable only to NGO's and charitable organizations that:-
- Have no income being generated from the business
- Is either a charitable trust or a registered society
- Should not be using their assets or income for any other purpose than charity
- Maintains regular book of accounts of their receipts and expenses.
- The trustees or the governing body of the organization are not deriving any undue benefit from these funds
- They should not be working to benefit any particular caste or religion
- If there is business related income, there should be separate accounts maintained for it. The donations received by the NGO should not be used for such businesses.
12A and 80G Registration procedure typically need to be done by an NGO immediately after its incorporation.
What is 80G Certificate?
80G Certificate is issued to a non-profit organization or non-governmental organizations (NGO), a charitable trust or a Section 8 Company by the Income Tax Department. The objective behind the 80G certificate is to encourage more and more donors to donate funds to such organizations. The benefit that the donor avails by donating to such an NGO is that he gets tax exemption on 50% of his donation as the donor is allowed to deduct their donations from their Gross Total Income. To avail the tax exemption, the donor needs to attach the stamped receipt against the donation that is issued by the NGO – the receipt needs to include the name, date, and PAN of the organization.
80G Registration Process
80G Registration procedure consists of following steps:
- The application for 80G certificate needs to be submitted to the Commissioner of Income Tax (Exemption) in the jurisdictional area of the institution.
- Once the form and the required documents for 80G registration are submitted, an on-the-premise inspection is done by the Income Tax department.
- The officials might ask for additional documents and evidence that are required to be made available by the institution.
- On satisfactory verification and scrutinizing of documents and the office of the NGO, the 80G certificate is awarded to the institution by the Commissioner.
Validity: 80G Certificate valid for a lifetime.
Documents Required for 80G Registration
The documents required for 80G registration are as follows:
- Form 10G.
- Registration certificate and MoA in case of Section 8 companies and Societies; Trust Deed in case of a Trust.
- No objection certificate from the owner of the property where the registered office of the Institution is located.
- PAN card copy of the NGO.
- Copy of Utility Bills – Electricity bills, water bills or House Tax Receipt.
- Donor list along with their complete address and PAN.
- Book of Accounts & Income Tax Return documents, of last three years.
- List of welfare activities being carried out & the progress report for last three years.
- Detailed list of the board of trustees.
- Deed for Verification – Original RC, MoA or Trust Deed.
What is 12A Registration?
Now that we have covered 80G Registration we will discuss 12A registration and 12A registration process.
By virtue of 12A registration, Trusts and NGOs and other Section 8 companies enjoy exemption from paying income tax. NGOs are basically organizations that are meant for charitable and non-profit activities. However, they do have income and would be required to pay tax as per normal rates if not registered under section 12A of the Income Tax Act. The Section 12A of the IT Act, 1962 does not differentiate between charitable and religious Trusts. Hence 12A registration is applicable to both the kinds of organizations.
12A Registration Process
The application needs to be done using Form 10A, as per Rule 17A of the Income Tax Act, 1962. The application needs to be filed with the Jurisdictional Commissioner of Income Tax (Exemptions).
Once the Form and the documents have been received, the Commissioner verifies the authenticity of the activities of the organization. He can call for additional documents and information as deemed fit.
On the satisfactory report, he will pass an order in writing for grant of 12A Registration. In case the Commissioner is not satisfied he will reject the application after which the applicant is given a fair chance to be heard.
12A Registration can be canceled at any point in time subject to proof that the activities of the organization being carried out is against the object of the institution or are not genuine or is benefitting a particular religion or caste or the funds are being invested in prohibited modes or income of the institution is being used for the benefit of specific persons.
Validity: 12A Registration valid for a lifetime.
Documents Required for 12A Registration
The documents required for 12A registration are as follows:
- Form 10A.
- Documental evidence of the creation of the Trust or NGO – Trust Deed of a Trust; Registration Certificate and Memorandum of Association of a society; section 8 companies to submit a certificate of incorporation and copies of MoA and AoA of the company.
- Three-year bank account statement of the Trust.
- PAN card of the organization.