Registering an NGO in India is advantageous for many reasons. The chief of them being the rebate they get in income tax under two major section – the 80G Registration and 12A. This post aims to explain the two in simple words for the benefit of NGO owners.
While Albert Einstein may have said that the hardest thing to understand in the world is Income Tax, this is an attempt to simplify one aspect of the Income Tax Act – the benefits available to NGOs. If you’re a proud founder of an NGO, a manager of its funds or a big-hearted donor, this article casts light on why registration of NGO in India under 12A and 80G and for the tax exemption is available and important.
Registration under 12A: The Stepping Stone
The foremost thing for an NGO to do is to seek an exemption certificate, which is known as a 12A registration. Without this registration process for your NGO in India, your receipts would be entitled to normal tax rates and the beneficial exemptions available would evade you. This society bylaw to register under 12A would also help you in seeking grants from government or organizations abroad, as it serves as a legitimate proof of the existence and purposes of your NGO. It is also noteworthy that regardless of whether the NGO is constituted as a trust, society or a not-for-profit company, it will have to seek a 12A certification to avail tax exemption.
Registration under 80G: Benefits
One of the major registration processes for an NGO in India is receiving 12A Registration Online in India. Once that is done the major benefit is that you can seek to register under 80G of the Income Tax Act. The advantage NGO registration confers is that the donor (that is the person donating money) to the NGO will no longer be taxed for donating to your NGO. The donors can use this registration to reduce the amount they donate to an NGO from their total taxable incomes. The circular benefit of this registration would be threefold:
As a society bylaw, 80G certification makes your NGO become a promising prospect and enhances the value of the organization and confidence of those associated with it.
It effectively enables a donor to not just feel good about making a donation for a cause but also reap the tax advantage of lowering taxable income associated with it. Well, who doesn’t like freebies?
Only an NGO registered under both 12A and 80G is eligible for availing government funding.
Getting an 80G registration also helps in seeking foreign contributions.
While the registration process may take a few months, it is a lifetime registration with no requirement for renewals.