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PROVISION FIRST TIME 12A & 80G
12A REGISTRATION: THIS REGISTRATION GIVES THE NGO’S AND TRUTSTS TAX EMEMPT STATUS FROM THE INCOME TAX DEPARTMENT. THIS MEANS THE DONATION THAT WOULD BE RECEIVED WOULD BECOME TAX DEDUCTIBLE FOR THE DONORS.
80G REGISTRATION : THIS IS ANOTHER TYPE OF REGISTRATION UNDER THE INCOME TAX ACT. IT ALLOWS DONORS TO GET TAX EXEMPTIONS FOR THE CONTRIBUTIONS THEY MAKE TO THE NGO
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WHAT IS THE VALIDITY FOR 12A PROVISIONAL CERTIFICATE?
Provisional certificate 12A is an important license for all the organizations in India, especially for the organizations which are seeking tax exemption as per Section 12A of the Income Tax Act and for other charitable institutions. The Income Tax department allocates this certificate making it possible for the people to make donations, which are tax deductible to the donors, to the concerned charitable organizations.
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Duration of Validity: Normally, a 12A provisional certificate is valid for a period of three years from the date it is issued. It is necessary for the organizations to file for final registration before the lapse of this provisional period if they wish to continue enjoying tax waivers.
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Renewal Process: In order to maintain their status and benefits during the provisional period, the organizations shall fulfill all the requirements of the law on a continuous basis. This means keeping proper books of account, submitting yearly returns and adhering to activity purposes which are spelt out in the trust deed, or the memorandum of association.
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Transition to Permanent Registration: After the term of three years has passed, if the organization has been conducting all operations within the stipulated regulations and efficiently proving its charitable causes, it may seek for permanent registration as per Section 12A. This is important because it guarantees the organization the tax exemption for a prolonged period.
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Consequences of Non-Compliance: However if the said organization does not seek for permanent registration within the expiry date of provisional certificate for registration or it fails to comply with the provisions of registration in the cause during that time, the organization risks to lose the qualification to the tax exemptions. This may affect the ability of the organization to collect funds and as well the ability of the third parties to claim tax relief on the contributions made to the organization.
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The Importance of Adhering to Standards: All organizations are expected to keep comprehensive records and observe all openness as long as their 12A provisional certificate is in force. Periodic audits and adherence to the directions of the Income Tax Department are important facets of this exercise.
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To conclude, the time limit attached to a 12A provisional certificate is significant for not for profit entities seeking tax exemptions and controlling the status of the entity.
WHAT IS THE VALIDITY OF 8OG CERTIFICATE?
The recent changes in the legal framework have also impacted the validity period of an 80G certification, which allows NGOs to seek tax relief on contributions received. Here’s how it works:
Initial Registration: An NGO is issued an 80G registration. It is granted an initial provisional registration for a period of 3 years. This implies that during this period of time, the NGO is allowed to solicit and receive donations that are subject to tax deductions.
Renewal Process: In the first place, three years in, the NGO is obliged to lodge applications for renewal. The renewal application is to be applied:
No less than 6 months before the expiration of the current renewal registration.
Or within 6 months from the commencement of its activities, whichever comes first.
Post-Renewal Validity: When renewed, the period for which the 80G registration will be in force is 5 years. After this period, the NGO shall apply for a renewal once again at least 6 months prior to the expiry date
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Revalidation Requirement: Clean existing ngos under section 80g cannot revalidation old approved ngos cover under section 80g without later stopping any other activity by submitting application for fresh registration in limit mentioned in the Finance Act 2020.
To sum up, an 80G certificate is normally granted for a period of 3 years, and upon expansion, it expires after a period of five years, hence necessitating further renewals after that.
WHAT IS THE MAX LIMIT FOR 80G REGISTRATION?
The Income Tax Act's Section 80G does not statutorily impose a maximum cap on the donations made to eligible NGOs and other charitable institutions. Rather, it provides for tax deductions suffixed to the donation amounts. Explanations are given below on how it operates:
Deduction Percentage: Any donation made to some specified class of charitable institutions and in accordance with Section 80G will be allowed a deduction from the taxable income of either 50% or 100% of the amount donated. The percentage that is valid will depend on the category of the organization that the contribution is made to.
Eligible Organizations: Not every donation made qualifies for tax deductions provided in Section 80G. However, only such donations made to certain specified funds or institutions authorized within this section are entitled to such tax exemptions.
No Maximum Limit on Donations: In as much as there is no limit on the size of the contribution, the claim for deduction that a taxpayer can make will be subject to the rate indicated for the receiving organization (either 50% or 100% maximum). Large donations do not translate to inflated deductions, as such deductions will still be subject to the treatment of that percentage
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Documentation Required: For tax purposes, prohibits donors from claiming the donation without maintaining proper documents like receipts from the NGO confirming the donation, which documents will be filed with the income tax return.
Thus, even though there is no upper ceiling on the 80G donations made by individuals, the tax relief availed in the form of claims is different for every institution and is limited to 50 or 100 percent of the actual amount of the contribution made.
​WHAT ARE THE NEW RULES FOR 12A & 80G REGISTRATION?
Specific Guidelines Pertaining to Registrations Under 12A and 80G
Concept of 12A and 80G Registration In India’s context, the registration under 12A and 80G serves a very important purpose for the functioning of non-profits (NGOs). Through the 12A registration, an NGO is exempted from paying tax on its income, provided the income so earned is spent on charitable purposes. At the same time, 80g registration helps in encouraging more individuals to contribute since it allows them to write off their donations when filing income tax.
Recent Changes in Rules of Registration
Validity Period of Registration:
Earlier, once the 12A registration of any NGO was granted, it was assumed to be granted forever. But w.e.f. from 1st April, 2021, new registrations are now granted for a period of only 5 years. After this duration, NGOs have to seek renewal. Registrations granted will be temporary for a period of 3 years. Thereafter, they will be subject to renewals every five years.
Application Process:
NGOs are required to make a fresh registration application to the Principal Commissioner or Commissioner under Section 12AB. For fresh registration purposes of new entities, application should be made at least one month before the commencement of the financial year in respect of which the assessment year application is made.
Inoperative Registrations:
In case an entity’s registration becomes inoperative on account of other exemptions (such as Section 10 (23C), it will have to apply again under Section 12AB for the registration.
Provisional Registration:
Provisional registration, which is for a period of three years, may be granted to new organizations for the period of their establishment before they are eligible for full registration. These amendments seek to enhance control and openness in these processes of registration.
Revalidation Requirement:
All registered NGOs are required to apply for revalidation in respect of Form No. 10A within a period of three months from April 1, 2021. This revalidation will also be for a period of 5 years only. After 5 years, revalidation, or rather the renewal, will be based on the above Form No. 10AB at least 6 months before the expiration of the current registration.
Changes in Objectives:
In case the NGO amends its objectives after registration has been granted, it shall reapply under Section 12AB. with new objectives.
