12A & 80 G Registration

12A & 80 G Registration

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OVERVIEW

12AB & 80G Registration

Introduction:

Ever since the beginning of the world, some organizations work for benefit of society instead of their benefits, and those organizations are classified as Non-Profit Organisations (NPOs) or Non-Government Organisations (NGOs). NGOs hold an important place in any country as they help people around them by providing them better health, better education, food for the poor and the list goes on.
The efforts put in by NGOs are such that even it is not unnoticed by the Income Tax Department and the department provides a lot of benefits to the NGOs registered under the Income Tax Act, 1961. The benefits are in the mode of exemption from income tax on the income applied for religious or charitable purposes. Even the donors giving donations to these NGOs are benefitted by getting a deduction from their Gross Total Income. These deductions are governed by section 80G of the Income Tax Act, 1961.

Benefits & Advantages of 12AB & 80G Registration

1.    Specific Donations received for the Corpus of the NGOs are fully exempt from Income Tax.
2.    Income from General Donations and other income is 15% exempt without any condition.
3.    Balance 85% from point 2 is exempt to the extent applied for charitable or religious purposes in India.
4.    If a Balance of 85% is not applied for charitable or religious purposes in the same year then the amount which could not be applied can be set apart to be applied in the future 6 years.
5.    12AB & 80G registered NGOs also attract huge donations.
6.    80G registered NGOs also benefit the donors with Income Tax Exemption by allowing 50% of the donation amount as deduction under section 80G.


Documents Required

1.    Trust Deed.
2.    Registration Certificate of NGOs under Companies Act, Societies Act, or Public Trust Act.
3.    Foreign Contribution (Regulation) Act, 2010 Registration Certificate. (If available)
4.    Existing Registration Order u/s 12A or 12AA or 12AB or 80G. (If any)
5.    Rejection Order u/s 12A or 12AA or 12AB or 80G. (If any)
6.    Self-Certified copies of final financials for the last three years.
7.    Self-Certified copy of the documents showing if there is a change in the objects.
8.    Brief note on the activities of the NGO.


Process

Section 12A states that to claim the exemption from Income Tax following are the conditions:
•    Registration u/s 12AB is required.
•    If Total Income exceeds 2.5 Lakhs, then audit by Chartered Accountant is required.
•    Income Tax Return to be filed within the time allowed u/s 139 (4A) which is usually 30th September.

1.    New NGOs Seeking Registration – Provisional Registration – Section 12AB & 80G

a.    The first step is to apply Form 10A at least one month before the beginning of the financial year relevant to the assessment year in which registration is required. (Provisional Registration)
b.    The application filed above is granted registration on a provisional basis within one month from the end of the month in which the application is uploaded. Approval is granted in Form 10AC with a sixteen-digit alpha-numeric Unique Registration Number (URN)
 
c.    Such provisional registration is valid for 3 assessment years.

2.    New NGOs Seeking Registration – Final Registration – Section 12AB & 80G

a.    The first step is to file an application in Form 10AB at least six months before the expiry of provisional registration or within six months of beginning its activities whichever is earlier. (Final Registration)
b.    The application filed above is granted registration within six months from the end of the month in which the application is uploaded. Approval or Rejection is made in Form 10AD.
c.    Such registration is valid for 5 assessment years (starting from the first year of provisional registration) after the officer is convinced about the objects and authenticity of Ngo's activities.

3.    Existing NGOs Seeking Registration’s Renewal – Section 12AB & 80G

a.    The first step is to file an application in Form 10A on or before 30th June 2021.
b.    The application filed above is granted registration within three months from the end of the month in which the application is uploaded. Approval is granted in Form 10AC with a sixteen-digit alpha-numeric Unique Registration Number (URN)
c.    Such registration is valid for 5 assessment years

4.    NGOs Registered u/s 12AB Renewal – Section 12AB & 80G

a.    The first step is to apply Form 10AB at least six months before the expiration of registration u/s 12AB.
b.    The application filed above is granted registration within six months from the end of the month in which the application is received. Approval or Rejection is made in Form 10AD.
c.    Such registration is valid for 5 assessment years after the officer is convinced about the objects and authenticity of Ngo's activities.

5.    NGOs Inoperative due to section 11(7)

a.    The first step is to apply Form 10AB at least six months before the beginning of the assessment year from which the said registration is required to be made operative.
b.    The application filed above is granted registration within six months from the end of the month in which the application is received. Approval or Rejection is made in Form 10AD.
c.    Such registration is valid for 5 assessment years after the officer is convinced about the objects and authenticity of Ngo's activities.

6.    NGOs adopted modification in existing objects

a.    The first step is to apply Form 10AB within 30 days from the date of modification.
b.    The application filed above is granted registration within six months from the end of the month in which the application is received. Approval or Rejection is made in Form 10AD.
c.    Such registration is valid for 5 assessment years after the officer is convinced about the objects and authenticity of Ngo's activities.

Time Required

Different Entities    Time Required
New NGOs Seeking Registration – Provisional Registration    One Month
New NGOs Seeking Registration – Final Registration    Six Months
Existing NGOs Seeking Registration’s Renewal     Three Months
NGOs Registered u/s 12AB Renewal    Six Months
NGOs Inoperative due to section 11(7)     Six Months
NGOs adopted modifications in existing objects    Six Months

FREQUENTLY ASKED QUESTIONS

Explore 12A & 80 G Registration

What is the validity for 12AB & 80G Registration?

Five Years, after this period renewal of registration, is required.

Whether the registration u/s 12AB & 80G is granted combined?

Both registrations need to be applied separately.

What happens if the set apart amounts from 85% are not applied for charitable or religious purposes?

If the amount set apart is not applied for the said purposes, then such an amount is taxable.

Whether the amount for charitable or religious purposes be applied outside India for Ngo's objective?

No, the amount can be applied only for objects in India.

How the donor can claim the deduction u/s 80G?

NGOs are now required to file statements of Donations received under Form 10BD and also required to issue Certificates to the donor under Form 10BE. The Certificate will allow the donor to claim the deduction.

What is the due date for filing Form 10BD & Form 10BE?

The due date is 31st May immediately following the financial year in which the donation is received.

What are the late filing fees for Form 10BD & Form 10BE?

The late filing penalty is Rs. 200 per day as per section 234G.

What is the mode of investment of NGOs Money?

The common investments are Government Saving Certificates, Post Office Saving Account, Fixed Deposit, Immovable Property, Shares of Public Sector Company, etc. The mode of investment is governed by Section 11(5).

Whether depreciation can be claimed as an expense when the asset cost is already claimed as applied for charitable or religious purposes?

No, only one claim is allowed.

What are the tax rates applicable to NGOs?

The tax rates applicable to individual/HUFs are applicable.