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12A or 12AA or 80G Registration - An Overview

All Non-Profit Organisations and Charitable institutions that have been registered under Section 8 are required to register their firm under Section 12A to procure exemptions in taxes. As per the Income Tax Act 1961, all Section 8 companies can seek registration to claim dispensation in taxes, provided that the requisite conditions are satisfied.

According to the new compliance provided for in the Income Tax Act with regards to the 12A/12AA and 80G registration, all NGOs having exemption u/s 12AA shall have to obtain a new registration u/s 12AB on or before March 31, 2022. The new concept of 12AB registration is aimed at removing the perpetual exemption of taxes and the registrations would be renewable every 5 years.

What is 12A Registration?

12A registration online is essentially a one-time registration granted by the Income Tax Department to trusts and other not-for-profit institutions to claim tax exemption. Generally, 12A registration is done immediately after the incorporation of Section 8 company. The purpose of this article is to inform you about 12A registration, 80G registration, 80G renewal and 80G deduction.

Benefits of 12A Registration Online

1. Ease of availing Tax Exemption:

Registering the business as a Section 8 company helps in availing several taxation benefits. This is done so that NGOs are able to save money from taxes and utilize it in social projects.

2. Right to Acquire Assets:

After the registration of a Section 8 company, it acquires the right to possess the land and other fixed assets and/or liabilities under its common seal. On the other hand, it is illegal for an unregistered organization to buy, hold/sell assets.

3. No Minimum Capital Requirement:

An NGO needs no minimum capital requirement to function independently. These organisations can be directly funded with the charity made to them.

4. Protection From Personal Liability:

One can buy, acquire & register assets in the name of the NGO. It is a separate legal entity. Thus, the individuals are not liable to bear the liability for untoward occurrences such as foreclosure, bankruptcy, judgment debt of the organisation.

5. Corporate Entity:

Through 12A Registration online, your organization’s transactions and engagements with the community improve significantly. The NGO also possesses the right to sue someone to enforce its legal rights.

6. Exemption from Stamp Duty:

As per the Income Tax Act, Section 8 companies are exempted from stamp duty. This results in additional tax-saving for the company. All the taxes saved through stamp duty are then invested towards the welfare of the company’s objectives. It also helps in the smooth functioning of the company by increasing its productivity.

7. Structured Financial Plan:

12A Registration online allows you to have a tax-free mechanism for actions you are carrying on under the NGO. It also lets you develop a structured financial plan to invest in the right assets and stay devoid of excess financial liabilities.

8. Stability Of Entity:

12A registration online helps build brand credibility to suggest that there is effective and responsible leadership in place. If an NGO has undergone 12A registration online, several political parties, government, donor agencies, financial institutions, charity organizations and other NGOs will want to collaborate with it to work towards common objectives.

9. Perpetual Succession:

An NGO ceases to exist even if the founder/trustees die or leave the NGO. The organization’s continuation will only stop if it is formally dissolved by the order of the court.

10. Admission to Credit:

An NGO can acquire funds from lenders and financial institutions to promote the organization’s activities, finance mortgages, acquire land and/or other fixed assets. Financial institutions want proof of 12A registration online before giving a loan.

11. Name Preservation:

Once an organization has done 12A registration online , no one can use the same name or name similar to it throughout India. This has the benefit of protecting your name from unauthorized use.

12. Opening Bank Account:

Opening a corporate bank account for the NGO suggests transparency. In addition to this, a bank account for the NGO showcases its corporate existence and readiness to receive donations. For opening a bank account, you will need to provide proof of 12AAregistration of your organization.

Documents Required for 12A Registration Online

Before we move ahead, let us discuss the types of NGOs in India:

Trust Registration under the Indian Trust Act, 1882
Society Registration under the Societies Registration Act, 1860
Section 8 Company Registrations under the Companies Act, 2013

Requisites for 12A Registration Online (In case of Trust)

Trust Deed on Stamp Paper
Self-attested copies ascertaining particulars of the Trustee and settler such as Aadhar Card, Voter ID Card, etc.
Address proofs of the trustee and settler along with the information related to occupation.
Photographs of Trustee and settler.
PAN Card of Trustee(s) and settler.
Documentation for the Trust’s registered office address.
NOC from the landlord in the case of rented property

Requisites for 12A Registration Online (In case of Societies)

For a society registration, below mentioned documents are required:

Name of the society
Address proof of the Registered office address.
Identity proof of all members
Self-attested copies of the Memorandum of Association and by-laws of the society

For Section 8 Companies Registration

Self-attested copies of Identity Proofs of the members
Address Proof of the members
DIR-2 along with ID & Address proof of Directors
Utility bill not older than two months
Proof of registered office address
No objection certificate (NOC) from the landlord if the registered office is taken on rent.
Affidavit regarding deposits
Duly notarized INC-14 Declaration by Professionals
Duly notarized INC-15 Declaration by Promoters
Estimated Annual Income
Memorandum of Association (MoA) and Articles of Association (AoA)
Particulars of the promoters as well as Board Members of the proposed company

Procedure for 12A Registration Online under Section 12A

Step 1: Log in to the Income Tax India e-Filing portal using login credentials and password.

Step 2: Navigate to Income Tax Forms under the e-File tab and select Form 10A/10AB, as the case may be, for 12A registration Online.

Step 3: Click on the option ‘Prepare and Submit online’ to fill in requisite details in the Form.

Step 4: Attach the required documents along with Form 10A/10AB.

Step 5: Submit the Form using Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).

Step 6: On receipt of application in Form No. 10A/10AB, the PCIT or CIT shall process the application within the prescribed time limit:

In case the applicant has already done u/s 12A registration Online, where Form No. 10A has been submitted by the applicant – Order granting registration shall be granted in writing in Form No. 10AC. A sixteen-digit alphanumeric Unique Registration Number (URN) is allotted on successful registration.

In cases where Form No. 10AB has been filed, order granting registration or rejection or cancellation shall be in Form No. 10AD.

How do 80G Registration help NGOs?

80G Registration help NGOs in the following ways:

With 80G Registration, NGOs are able to motivate others to bring in donors to the organization
Donors can claim 50% exemption under Income Tax Act by submitting receipt with the stamp as a supportive document.

80G Renewal

With effect from April 1 2021, upon filing the application for 80G renewal, an order granting the applicant with the revalidated registration is passed within three months. This renewed registration under Section 12A and/or Section 80G is valid for a period of five years, post which it needs to be revalidated again. The 80G renewal has to be made at least six months prior to the expiry of the validity period of the registration.

After receiving the renewal application, the Principal Commissioner of Income Tax (PCIT) or Commissioner of Income Tax (CIT) will pass an order granting approval in writing in Form No.10AC and issue a 16-digit Unique Registration Number (URN) to the applicants.

It is worth mentioning that the PCIT/CIT may reject the application and is entitled to demand further documents from the applicant to test the genuineness of activities of the institution, as the case may be. The rejection order is also passed in Form No.10AC.

80G Deduction

Section 80G is a facility available under the Income Tax Act that allows NGO taxpayers to claim deductions for various contributions made as donations to the NGO. Please note that not all charitable donations are eligible for deduction under Section 80G. Only donations made to the specified funds as per the Income Tax Act can qualify as a deduction.

The Government of India had made a move to introduce Section 80G deduction to encourage people to donate. The Government, by providing income tax relief, intends to motivate people to make more donations to worthy causes. The amount donated is allowed to be claimed as a deduction at the time of filing the Income Tax Return. The 80G deduction can be claimed by individuals, partnership firms, HUF, company and other taxpayers, irrespective of the income earned.

Trusts and institutions registered under Section 80G are provided with a unique registration number by the Income Tax Department which is also required to be mentioned on the receipt of donors claiming 80G deduction. Also, the donor must note that this registration number needs to be valid on the date of a particular donation. If the donation is made while the Section 80G registration is no more valid, then the donation would not be eligible for deduction.

Form 58A

Form 58A is required to be filed if the taxpayers claim a 100% deduction on a donation. It is provided only for specific types of eligible deductions.

Form 10A

Form 10A is a form filed by entities willing to make a registration under Section 12A. The procedure for applying for Section 12A registration online has been made through Form 10A. A Digital Signature Certificate (DSC) of the founder or Author of Trust/Society/NPO is required for filing Form 10A. This application shall be addressed to the Commissioner of Income Tax along with the requisite documents.

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FAQ's

1. Who can Apply under Form 10A?

Form 10A shall be used for the following purposes

a. Application for revalidation of registration/approval for existing organizations registered/approved under section 12A/12AA/10(23C)/80G.

b. Application for provisional registrations/approval under section 12AB/10(23C)/ 80G

c. Due Dates to apply in Form 10A
i. Trusts already approved/registered and their approval/ registration is continuing an on 01-04-2021 : On or before 30-06-2021
ii. Trusts making application for provisional registration/ approval : 1 month before the commencement of the previous year from which the said approval is sought.

2. Who can Apply under Form 10B?

Form 10AB shall be used for the following purposes

Conversion of provisional registration into regular registration
Renewal of registration/approval after five years
Activating inoperative registration under section 10(23C)/10(46). Re-registration for modification of objects for entities registered u/s 12.
Due Dates to Apply in Form 10AB

3. What is 80G Registration Compliance Requirement?

The applicant or recipient of the 80G registration must comply with the requirements specified below

The application can only be made by a public charitable trust, registered society, recognized educational institution or an institution funded by the Government.
The trust/institution applying for the certificate must be duly registered under the Societies Registration Act, 1860; or Section 25 of the Companies Act; or any other relevant Acts.
Applicants of the certificate must not represent any religion based or caste and creeds based activity.
The respective trust/institution should only utilize the donated funds for charitable purposes.
The registered trust/institution should not hold any income which is not exempted.
Entity’s pursuing any other businesses are required to maintain a separate account, so that the donations received are not confused with savings of any other kind.
The applicant should have maintained the appropriate annual returns, accounting and book keeping before applying for the certificate.