Apply for Trust/Society/NGO Registration under 12A Income Tax
Mastering 12A Income Tax Registration: The Blueprint for Nonprofits
Non-Governmental Organizations (NGOs) play a crucial role in the development and welfare of society. These organizations, whether trusts, societies, or section 8 companies, work selflessly towards charitable or religious causes, aiming to make a positive impact on the lives of people in need. Running a charitable organization in India is a noble endeavour, but it often comes with financial challenges. This is where Section 12A of the Income Tax Act comes into play. To support their noble endeavours, the Indian government provides certain benefits and tax exemptions to registered NGOs under Section 12A of the Income Tax Act.
Obtaining 12A registration allows organizations to receive income tax exemption under Section 11 of the Income Tax Act, allowing them to receive more resources to fulfil their mission. This also incentivizes donors to claim deductions on their contributions under Section 80G of the Income Tax Act.
Trust and credibility are crucial assets for any charitable organization, and 12A registration enhances their reputation through recognition, attraction of donors, and government partnerships. Registration often opens doors to collaborations with government agencies and other reputable organizations.
Financial transparency is another benefit of 12A registration. Registered organizations are required to maintain proper books of accounts and records, ensuring transparency in financial operations. Additionally, the registration process necessitates adherence to legal requirements, ensuring that the organization operates within the legal framework.
12A registration is not just a matter of compliance; it is a strategic move that can significantly impact the sustainability and effectiveness of your charitable organization. The tax benefits, enhanced credibility, and commitment to transparency can make your mission more sustainable.
Eligibility and Prerequisites
Meeting eligibility criteria and prerequisites is the first step towards unlocking the benefits of tax exemption and enhanced credibility.
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Legal Entity and Purpose
To be eligible for 12A registration, your organization must meet certain fundamental criteria:
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Legal Entity: Your organization should be a legally recognized entity, registered as a trust, society, or section 8 company under the relevant state laws. Each of these entities serves different purposes:
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Trust: Typically formed for the management of a specific trust or endowment.
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Society: Primarily established for charitable, literary, or scientific purposes.
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Section 8 Company: Created for promoting commerce, art, science, sports, education, research, social welfare, and charity.
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Non-Profit Objective
The primary objective of your organization should be non-profit in nature. This means that your organization's activities must not be driven by profit motives. Instead, they should focus on charitable, religious, or social welfare activities.
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Proper Maintenance of Records
Registered organizations must maintain proper books of accounts and other records. These records should accurately reflect the financial transactions and activities of the organization.
Essential Documents
The key to a successful 12A registration application lies in the documentation you provide which is listed below:
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Trust Deed, Memorandum of Association, or Society Bye laws
These foundational documents are critical for establishing the legitimacy and purpose of your organization. Depending on the type of entity, you'll need one of the following:
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Trust Deed: If you're a trust, you need a trust deed that outlines the objectives and rules governing the trust.
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Memorandum of Association: If you're a section 8 company, you should have a memorandum of association.
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Society Bye-laws: Societies require bye-laws that detail their objectives, membership rules, and operational guidelines.
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PAN Card
You'll need a copy of the Permanent Account Number (PAN) card for your organization. This is crucial for tax-related transactions and identification.
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Bank Account Details
Provide proof of your organization's bank account. This includes a bank statement or a letter from the bank confirming the existence of the account.
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Registration Certificate
If your organization is registered under the relevant state laws, include a copy of the registration certificate. This further establishes your legal status.
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Donation Receipts and Utilization Reports
To demonstrate your organization's non-profit activities, include donation receipts issued to donors and reports on how these funds were utilized for charitable purposes.
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Audited Financial Statements
Include audited financial statements, including income and expenditure statements and balance sheets, for the past few years. This showcases your organization's financial transparency.
Starting from April 1, 2021, there have been significant changes in the registration process for NGOs under the Income Tax Act. Let's delve into these transformations:
For existing NGOs, the Principal Commissioner reviews applications, ensuring that genuine activities are conducted. Dissatisfaction can lead to rejection, with a fair hearing granted before a final decision.
Registration Procedure
The registration procedure is outlined in Rule 17A:
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Application Forms:
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Existing NGOs: Form No. 10A
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New NGOs: Form No. 10AB
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Required Documents:
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Pan Card with IT Login & Password
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Trust Deed or Creating Instrument (Self-Certified)
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Registration Certificate of Trust/Society/Section 8 Company (Self-Certified)
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Copy of FCRA Registration Certificate (if applicable, Self-Certified)
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Copy of 12A Income Tax Registration Certificate (if re-applying, Self-Certified)
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Copies of Annual Accounts (up to 3 years if applicable)
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Documentation for any changed or modified objectives
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Notes on Trust/Society activities
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Filing Process:
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Submit Form No. 10A or 10AB online via the Income Tax website (www.incometax.gov.in).
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E-Verify or digitally sign the application.
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4: Receiving Your Registration Certificate
Once your application is approved, you'll receive a registration certificate under Section 12A of the Income Tax Act. This certificate officially grants your organization tax-exempt status.
5: Post-Approval Compliance
After obtaining 12A registration, your organization must continue to maintain proper books of accounts, file annual returns, and comply with tax laws to retain its tax-exempt status.
Steps for Online Application for Section 12A Registration
Steps for Online Application for Section 12A Registration
Step 1: Go to the official Income Tax Department website (www.incometax.gov.in).
Step 2: Register/Login: Create an account or log in if you already have one.
Step 3: Navigate to the e-filing portal and select "Apply for registration under Section 12A."
Step 4: Fill out Form No. 10A (Application for registration under Section 12A) with accurate details.
Step 5: Upload the required documents, including the trust deed, registration certificate, and other supporting documents as specified in the form. Ensure they are self-certified.
Step 6: Review the information provided in the form and the uploaded documents for accuracy and completeness.
Step 7: Submit the application.
Step 8: Pay any applicable fees or charges as per the current guidelines. Currently there are no charges officially
Step 9: Receive an acknowledgment or receipt for the submission.
Step 10: Wait for the processing of your application.
The order for registration will be passed within 3 months for new NGOs who will be granted provisional Registration.
For Final Registration, the processing time is 6 months.
You may check the status of your application online.
Step 11: If the application is approved, you will receive the Section 12A registration certificate.
Step 12: Keep a copy of the registration certificate for your records and for future reference.
Key Points to Note :
Compliance and Reporting Obligations
Maintaining your 12A registration status involves adhering to specific compliance and reporting obligations.
Non-Compliance and Penalties
Non-compliance with the registration and compliance requirements for NGOs can lead to various penalties and legal consequences. It is crucial for NGOs to adhere to the provisions of the Income Tax Act to maintain their tax-exempt status and avoid potential legal actions.
Below, we outline some of the common areas of non-compliance and the corresponding penalties:
NGOs can seek various benefits by obtaining 12A registration, as it grants them tax exemption under Section 12A of the Income Tax Act. This registration can be applied for online. It's essential for NGOs to file their income tax returns in India to maintain their tax-exempt status and benefit from the 12A certificate. Additionally, there's a provision for 12AB registration renewal to ensure ongoing compliance with tax regulations. Section 12A is a significant part of the Income Tax Act, offering tax benefits to registered NGOs. Obtain your 12A registration certificate to enjoy these advantages.