Income Tax is often the hardest aspect for every professional and so for NGO founders and financial experts of NGO. Here we describe what NGO registration means under Sections 12A and 80G for tax exemption.
As registration under Section 12A is for tax exemption, an NGO which has not registered under this cannot enjoy the privilege of tax evasion and would have to pay surplus during the year.
All Charitable trusts, Societies, and Section 8 Companies, except Private or family Trust, are eligible to register under Section 12A. But before registration under 12 A and 80G, an NGO has to get itself first registered under the Income tax by following the below-mentioned steps.
Step 1: Application has to be filed in Form 10A with the Income Tax Commissioner
Step 2: Important documents like ID proof of the trustees or managers, registration certificate of the NGO, Trust deed or MoA or AoA need to be submitted
Step 3: A copy of the PAN of the registered NGO
Step 4: Once the documents are submitted, it will be reviewed by the Commissioner who may ask for additional information
Step 5: If everything is found to be satisfactory, the registration will be done, else it will be rejected.
The overall process may take up five months and valid for a lifetime.
As per Section 80G of the Income tax Act, if an NGO gets an 80G certification then its donors (a person who donates money to the NGO) will not be taxed for offering donations and gain financial benefits in the taxable amount of their income.
The NGO which wants to register under Section 80G and 12A has to be duly registered and charities should not have a religious angle.
Step 1: An application has to be filed in Form 10G with the Income Tax Commissioner
Step 2: Important documents to be submitted are:
Step 3: Upon submission, the documents would be reviewed by the Commissioner. If required, he may ask for additional documents or information and the same have to be provided within the timeframe to avoid rejection
While the registration process may take a few months, it is a lifetime registration with no requirement for renewals.
At times, under certain circumstances even after the registration process and meeting all the legal requirements, donors may be disentitled from claiming tax deductions.
The following situations are:
1. If an organization is engaged in religious affairs or promotes the interest of a particular community
2. If the organization does not hold transparency in its routine account of expenditures and receipts
3. If the NGO is not legally registered under the particular Act it falls onto - Societies, Section 8 and Trust
4. If this registration process for NGO has any ‘non exempted income’, that is if they have any business income or a commercial purpose that gives rise to incomes not specifically exempted for NGOs.
Know the things should be on mind before starting an NGO in India.