Section 12A and Section 80g

An NGO can avail income tax exemption by getting itself registered and complying with certain other formalities, but such registration does not provide any benefit to the persons making donations. The Income Tax Act 1961 has certain provisions which offer tax benefits to the "donors". All NGO's should avail the advantage of these provisions to attract potential donors. Section 80G is one of such sections. If an NGO gets itself registered under section 80g then the person or the organisation making a donation to the NGO will get a deduction of 50% from his/its taxable income. If an ngo gets registered under 12A and 80g, then only it is applicable for any government funding. A newly registered ngo can also apply for 80g registration. The following documents are required for 80g registration.Section 12a and 80g is of a great relief. NGOs do not have to pay tax for the entire lifetime if it gets registered under section 12a. Besides, the corporate and the ministries prefer to give donations to those who are having 12a and 80g registration. By doing such, their taxes are deducted by 50% of the donation given. Today in this growing IT world, the website of a NGO is essential which speaks about the NGO profile, activates, their members, its history, address and the social work done by it. They should maintain their balance sheets, annual reports, accounts, records, bills, vouchers, photographs for proof of their social activities. This is of a real great help especially during the investigation by the IB officers during FCRA Registration or verification by the government officials applicable for government funding or any corporate officials applicable for corporate social responsibility funding.

Condition for registration u/s 80g :
For approval under section 80G the following conditions are to be met:
i) the NGO must not have any income which are not exempted, such as company income. If the NGO has business income, then it ought to preserve separate books of accounts and need not divert donations gotten for the purpose of such business if.
ii) the bye laws or goals of the NGOs must not contain any regulation for investing the income or possessions of the NGO for purposes aside from charitable activities.
iii) the NGO is not working for the advantage of particular religious community or caste.
iv) the NGO maintains routine accounts of its expenditures & receipts.
v) the NGO is appropriately signed up under the Societies Registration Act 1860 or under any law corresponding to that act or is signed up under section 25 of the Companies Act 1956.

Benefits of registration u/s 80g :
There is a ceiling limitation upto which the benefit is allowable to the donor. If the quantity of reduction to a charitable organization is more than 10 % of the Gross Total amount income calculated under the Act (as lowered by earnings on which income tax is not payable under any arrangement of this Act and by any quantity in respect of which the assessee is entitled to a reduction under any other arrangement of this Chapter), then the quantity in excess of 10 % of Gross Total Earnings shall not get deduction under section 80G. While computing the overall income of an assessee and for arriving at the deductible quantity under section 80G, first the aggregate of the sums donated needs to be discovered. 50 per cent of such contributions has actually to be found out and it must be limited to 10 per cent of the gross total income. The unwanted will have to be ignored if such quantity is even more than 10 percent of the gross overall earnings. The persons or company who donate under section 80G gets a deduction of 50 % from their taxable income. Below at times a confusion creeps in, that the tax advantage under section 80G is 50 %, but in fact it is not so. 50 % of the donation made is allowed to be deducted from the gross income and consequently tax is determined.

Following documents are required for approval under Section 80g of Income Tax Act 1961:-
  • Copy of Registration certificate of the ngo and its bye-laws
  • Copies of Detail of activities since its inception or last three years whichever is less
  • Copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is less.
  • Copy of Pan Card of the ngo
  • Details of the members of the ngo

Registration under 12A(a) :
Click to Download 12A(a) form.

Registration under 80G(5)(vi) :
Click to download 80G(5)(vi) form.

With Result from 1st October 2009 it is not required for a trust to apply for renewal of 80G certificate, if the exact same stands on 01.10.2010 or valid upto a date thereafter unless division particularly ask Trust to obtain renewal. So Old 80G certification will remain legitimate if the exact same is valid.

Contributions to the following are eligible for 100 % reduction subject to 10 % of adjusted gross overall earnings.

  1. Contributions to the Government or a regional authority for the purpose of promoting family planning.
  2. Amounts paid by a company to Indian Olympic Association.

Contributions to the following are eligible for 50 % reduction subject to 10 % of adjusted gross total earnings:-
1. Donation to the Government or any local authority to be utilized by them for any charitable functions other than the function of advertising family planning. Qualifying Limit :- The certifying limitations u/s 80G is 10% of the adjusted gross overall income. The limit is to be applied to the adjusted gross overall income. The 'adjusted gross total earnings' for this purpose is the gross total income (i.e. the sub total of income under various heads) minimized by the following : Amount deductible under Sections 80CCC to 80U (however not Area 80G). Exempt earnings. Long-term capital gains. Earnings described in Sections 115A, 115AB, 115AC, 115AD and 115D, associating with non-residents and foreign business. Qualified Donation :- There are thousands of trusts registered in India that claim to be taken part in charitable tasks. Numerous of them are authentic but some are not true. In order that just authentic trusts get the tax benefits, the Government has actually made it mandatory for all charitable trusts to register themselves with the Income Tax Division. And for this purpose the Government has actually made two kinds of registrations necessary u/s 12A & U/s 80G. Just if the NGO whether trust or society or section 25 Company Act 1956 follows the registration under section 12A, they will get the tax exemption certificate and then 80G certification. When the NGO gets enlisted under section 12A, the entire tax of the charitable firm is exempted throughout lifetime. If it gets registered under section 80g, then the donor gets 50% tax rebate of donated amount while giving donation to that NGO. The government periodically launches a list of approved charitable institutions and funds that are qualified to receive contributions that qualify for deduction. The list includes trusts, societies and corporate bodies integrated under Area 25 of the Companies Act 1956 as non-profit companies.

Restriction on contribution amount : There is no ceiling on the quantity of contribution. In some cases there is a cap on the qualified quantity i.e. a maximum of 10% of the gross overall earnings. Reduction amount U/s 80G : Donations paid to specified institutions get tax reduction under section 80G however undergoes specific ceiling limits. Based on limitations, we can generally divide all eligible donations under area 80G into four categories:. a) 100 % deduction without any certifying limitation (e.g. Prime Minister's National Relief Fund). b) 50 % reduction without any certifying restriction (e.g. Indira Gandhi Remembrance Trust). c) 100 % deduction subject to certifying limit (e.g. an accepted institution for advertising family planning). d) 50 % reduction based on certifying restriction (e.g. an authorized institution for charitable purpose other than promoting family planning). List of Institution donation to whom is qualified to 100% deduction without any certifying restriction, eligible to 50 % reduction without any certifying limitation, 100 % & Based on qualifying limitation and of those eligible for 50 % deduction subject to qualifying limitation are as follows:
Contributions with 100% deduction without any qualifying restriction:

  1. Head of state's National Relief Fund.
  2. National Defense Fund.
  3. Prime Minister's Armenia Earthquake Relief Fund.
  4. The Africa (Public Contribution-- India) Fund.
  5. The National Foundation for Communal Harmony.
  6. Approved college or university of nationwide eminence.
  7. The Chief Minister's Earthquake Relief Fund, Maharashtra.
  8. Contributions made to Zila Saksharta Samitis.
  9. The National Blood Transfusion Council or a State Blood Transfusion Council.
  10. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
  11. Army Central Well-being Fund, Indian Naval Ben. Fund, Flying force Central Well-being Fund.
  12. National Disease Help Fund.
  13. Chief Minister's or Lt. Guv's Relief Fund.
  14. National Sports Fund.
  15. National Cultural Fund.
  16. Govt. / local authority / institution / association towards promoting family planning.
  17. Central Govt.'s Fund for Innovation Development & Application.
  18. National Count on for Well-being of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities.
  19. Indian Olympic Association / various other such notified association.
  20. Andhra Pradesh Chief Minister's Cyclone Relief Fund.

Donations with 50 % deduction without any certifying limitation :

  1. Jawaharlal Nehru Memorial Fund.
  2. Prime Minister's Dry spell Relief Fund.
  3. National Kid's Fund.
  4. Indira Gandhi Remembrance Trust.
  5. The Rajiv Gandhi Foundation.
  6. Donations to govt. / neighborhood authority for charitable functions (leaving out family planning).
  7. Authority / corporation having income exempt under erstwhile section or u/s 10(26BB).
  8. Contributions for repair work / restoration of informed places of worship.
  9. World Vision India.
  10. Udavum Karangal.

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