Section 80G and Section 12A

Shop and Establishment Registration

Section 12A and Section 80G both are for the registration of charitable trusts,Non-Government Organization,relief funds, etc.
Both the registrations are granted by the Income Tax Department.
Section 12A provides exemption from Income Tax on surplus income of the institute.
Section 80G enables assessees to claim a deduction in Income Tax on the donated money.
Both the registrations apply just after the incorporation of the institute.
Motive behind section 12A and section 80G of the Income Tax Act 1961 is to promote donation for the worthy cause.

Eligibility and conditions under section 12A and section 80G registration

The institute has been duly constituted as a Charitable Trust or registered under section 25 of the company act 1956 or section 8 companies under company act 2013 or University established by law or any other educational institutes.
No religious trust or the charity that involves religious preaching under section 80G of the Income Tax Act 1961.
Religious Trusts can be registered under section 12A of the Income Tax Act 1961.
If the entity is involved in any business transaction that is not the donation alone,then both the accounts should be handled separately.
No Diversion of funds should be done, outside the country or to the political party for registration under section 80G of the Income Tax Act 1961.
Any trust that is family or private shall not be registered under section 12A of the Income Tax Act 1961

Why is registration under section 80G and section 12A required?

All the charitable trusts and NGO work for the betterment of the society, for that they need money and donation is the main source of income for these institutions. If a institute is registered under Section 80G then the donor will gets the benefit in income tax . The amount that donor will donate to the institute will be deducted from income tax . If the trust is registered under section 12A the charitable trust itself gets exemption from income tax in its surplus income. This is the incentive to increase donations for the institutes ,after this people will take more interest in donating money as it is also beneficial for them too . registration under both sections makes trust more reliable and trustworthy.

All the charitable trusts and NGO work for the betterment of the society, for that they need money and donation is the main source of income for these institutions. If a institute is registered under Section 80G then the donor will gets the benefit in income tax . The amount that donor will donate to the institute will be deducted from income tax . If the trust is registered under section 12A the charitable trust itself gets exemption from income tax in its surplus income. This is the incentive to increase donations for the institutes ,after this people will take more interest in donating money as it is also beneficial for them too . registration under both sections makes trust more reliable and trustworthy.

Mode of Contribution

The person can claim a deduction by making a contribution through any mode whether it is in cash/cheque/a draft/online.

EXCEPTION– donation up to Rs 2000 in cash is claimable, exceeding Rs 2000 donation will not be allowed for deduction by the donee. Therefore, donations above should be paid in any amount for more than cash.

*NOTE

Any donation other than currency is not allowed for deduction. Such as food, medicines , material, clothes etc. donation is not claimable under Section 80G.

BENEFITS OF REGISTRATION

Registration under section 12A and 80G will make the institutes more reliable. It also boosts the brand value of the institutes. in the present scenario brand name plays a vital role in the growth and development of the society.
More capital is available for the NGO or Trust as Income Tax is exempted for the donation in these institutes.
The organization avails benefits for accumulating and setting aside income. Provided that shall not be more than 15%
The accumulation of incomeshall not be included in total income,which is deemed as application of income.
Funds and grants from the government, authorized agencies,and international sources are permitted after registering under both section 80G and section 12A.

Top corporations donate funds under the name of Corporate Social Responsibility (CSR) to the institutes which are involved in the welfare of society. Companies prefer institutes that are reliable.
NGO get funding from foreign countries ,for that government had enacted the Foreign regulation act of 2010(FCRA) to control or check the transaction . Under the FCRA provisions only those trusts can get the international funding which are registered under section 12A and section 80G.
Registration under section 12A and 80G broadens the scope of NGO or Trust’s mission by attracting new donors.

Procedure for registration

Procedure for sec-80G registration

Online Application to the Income Tax Commissioner.

An on-premise inspection done by the income tax department.

Online document submission.

Registration will be provided if authority satisfies with the documents and other requirements.

Procedure for sec-12A registration

The assessee shall file the application to the commissioner, within one year of incorporation.

Submit the documents required by the commissioner.

Thereafter, the commissioner shall approve the registration or reject the application, if application is approved the applicant will be eligible to claim or if its rejected then applicant will receive the objections for rejection.

Documents for sec-80G registration

Trust deed or MoA and registration certificate for companies

No objection certificate from the owner of the property.

Form-10A

PAN of the institute.

Utility bills such as electricity, water etc.

KYC documents.

List of donors along with address

Documents related to ITR

Further any documents may be needed at the time of inspection.

Documents for sec-12A registration

Trust deed or MoA of companies.

Certificate of incorporation.

Form-10A.

Audit report by the Charted Accountant.