Are you somebody who runs a trust or intends to start one? Are you aware that the Income Tax Law provides you special rebates under sections 12AB and 80G? Are you grabbing this opportunity, or do you want to, but…don’t know how? Let’s explore all the relevant details for understanding the 12 AB and 80 G registration meanings, needs, and benefits related to them.
If you’re a founder of an NGO or a big-hearted donor, then this information is relatable. You will be able to find all the answers you need to save your money and can also avail the benefits offered by the Act.
80G Registration comes under Section 80G of the Income Tax Act and provides benefits to the donor of an NGO, whereas Section 12AB Registration will assist an NGO in getting an organization’s income exempted from Tax.
Both 80G Registration and 12AB Registration apply only to NGOs and charitable organizations. The 80 G Certificate is issued to a non-profit organization or non-governmental organization (NGO), a charitable trust, or a Section 8 Company by the Income Tax Department.
Charitable trusts and exempt institutions that are already registered under section 12A or section 12AA of the Income Tax Act, 1961 will now be required to reapply online for registration and approval by August 31, 2020.
Provisions of registration under section 12AA or section 12A will become redundant from 01st June 2020 and a new section 12AB will come into force with effect from 01st June 2020. All the existing registered trusts under the erstwhile section 12A or section 12AA would move to the new provision section 12AB.
The new section 12AB proposes to change the registration process by prescribing the time frame for processing the application and the validity of such a registration certificate so granted under the new section 12AB.
An order granting registration or approval shall be passed within 3 months of the application. Such registration or approval shall be valid for 5 years.
Similarly, charitable trusts and exempt institutions that already have Section 80G certificates will now be required to reapply online for registration or approval by August 31, 2020. The registration shall remain valid for 5 years.
The compliance burden on Charitable Trusts and Exempt Institutions goes further to file statements of donations received and issue donation certificates to donors in line with TDS provisions. Hefty fines and penalties are imposed for any failure to file such statements.
Terms and Conditions for Section 12AB Registration
- All the existing registered trusts under section 12A or section 12AA would move to the new provision section 12AB.
- Newly established trusts and institutions applying to income tax for registration for the very first time will be given provisional registration for three years.
- The provisional registration will be valid for three years.
- Prior to 6 months from the completion of three years of provisional registration, an application for renewal of provisional registration or rather registration has to be made.
- All the registrations under Section 12A or 12AA once done, will be required to renew their registration at the interval of every 5 years.
After processing your application, your trust or institution’s registration under sections 12AA and 80G may be re-validated by income tax for a period of 5 years
Benefits of Section 12AB Registration
- Tax Exemption: The trust or institution is eligible for tax exemption under Section 11 or Section 12 of the Income Tax Act, 1961.
- Donations: Donations made to the trust or institution are eligible for tax deduction under Section 80G of the Income Tax Act, 1961.
- Credibility: Registration under Section 12A(1)(b) of the Income Tax Act, 1961 enhances the credibility of the trust or institution, as it signifies that the activities of the trust or institution are genuine and are for charitable purposes only.
Documents required for Section 12AB Registration
- Company / Trust / Society registration certificates/registration documents
- Copy of PAN card of the directors/trustees
- Copy of the Aadhaar Card of the directors/trustees
- Digital signature of one of the directors/trustees
- By-laws of this company, AOA, MOA copies
- Audit reports for all financial years since incorporation
- Audited Financials for all financial years since incorporation
80G Registration under Section 80G of the Income Tax Act provides benefits to the donor of an NGO. The donor gets financial benefits in the taxable amount of their income. 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 of 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.
Conditions to be fulfilled for Section 80G(5) Registration
- The NGO should not have any income which is not exempted, such as business income. If the NGO has business income then it should maintain separate books of accounts and should not divert donations received for the purpose of such business.
- The bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes other than charitable purposes.
- The NGO shall not work for the benefit of a particular religious community or caste.
- The NGO shall maintain regular accounts of its receipts & expenditures.
- Donor-wise details are to be maintained and all donors will have to be given a certificate.
- Tax deductions under section 80G will not be available to donors who opt for a reduced rate of tax.
Benefits of Section 80G(5) Registration
- Registration under section 80G(5) of the Income Tax Act provides benefits to NGOs.
- If an NGO has an 80G(5) certificate with them, the donor gets financial benefit in his/her taxable amount of their income.
- If an NGO gets itself registered under section 80G(5) then the person or the organization making a donation to the NGO will get a deduction of 50% from his/its taxable income.
- By availing 80G(5) Certificate, NGOs can attract more donors.
Documents required for Section 80 G Registration
- Company / Trust / Society registration certificate
- By-laws of this company, AOA, MOA copies
- Details of activities since its incorporation
- Digital signature of one of the directors/trustees
- Audit reports for all financial years since incorporation
- Audited Financials for all financial years since incorporation
- Section 12AB/80 G Certificate
Conclusion
As we all know, 80G and 12AB registrations are invaluable tools for charitable trusts, offering tax benefits and other related benefits. The Digital Seva Kendra platform focuses on enhancing credibility, attracting donors, and enabling sustained positive impact. CSC Digital Seva services provide professional guidance to ensure smooth registration, fostering a culture of giving for a better society.
Our team of experts will help you to register your Section 8 Company in a seamless manner without you worrying about the documents and registration process.
We will take care of all your documents and registration requirements and do the incorporation in the most efficient way as we are one of the top-notch Digital Seva service providers offering a wide range of services related to company registrations, taxation, GST services, registration for new start-ups, partnerships companies, private limited, filing returns, etc and many more under one roof having years of experience into company registrations and other related services.