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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 organization 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. 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 these registrations. 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 this section, following conditions are to be met:
i) the NGO must not have any income which is 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 have 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:-
1. Copy of Registration certificate of the ngo and its bye-laws
2. Copies of Detail of activities since its inception or last three years whichever is less
3. Copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is less.
4. Copy of Pan Card of the ngo
5. Details of the members of the ngo
For 12A and 80G registration, please feel free to counsel us at 7838272423 or visit our website
