12A and 80G
12A and 80G are registration provisions under the Income Tax Act of India that provide certain benefits to NGOs. Here’s an overview of the welfare associated with each registration
Dispensation from Income Tax: Once an NGO is registered under Section 12A, it becomes eligible for exemption from paying income tax on its surplus income. This includes income generated from donations, grants, or any other sources.
Retaining Income: Registered NGOs can retain and accumulate their income instead of spending it within the financial year. This allows them to build reserves for future projects or expansion.
Attracting Donors: Many individuals and organizations prefer to donate to NGOs with 12A registration as it assures them that their donations will be utilized for charitable purposes and the NGO is recognized by the Income Tax Department.
Foreign Donations: 12A registration is a prerequisite for NGOs to receive foreign contributions under the Foreign Contribution (Regulation) Act (FCRA). FCRA registration allows NGOs to accept funds from foreign sources.
Tax Deduction for Donors: Donations made to NGOs registered under Section 80G are eligible for tax deductions. The donor can claim a deduction of 50% or 100% of the donated amount, depending on the NGO’s eligibility.
Attracting Donors: 80G registration helps NGOs attract more donors as individuals and companies are more likely to contribute when they can avail of tax benefits for their donations.
Transparency and Trust: 80G registration signifies that the NGO’s activities have been scrutinized and approved by the Income Tax Department. It enhances transparency and builds trust among potential donors.
It’s important to note that these benefits may vary based on the specific regulations and provisions in effect at the time. NGOs should consult with a tax professional or seek guidance.