Did you know that good deeds and kindness might help you save money on taxes? Contributions to NGOs, trusts, and federal and state relief programs are tax-exempt, according to tax officials. Sections 80G and 12A of the Indian Income Tax Act, 1961, cover these expenses. NGOs that are 12A-registered can apply for a tax exemption from the IRS. Donors are more likely to donate to NGOs that have received the 80G accreditation. Non-profit organizations that are not registered are subject to standard tax rates.

What is an NGO?

An NGO (non-governmental organization) is a for-profit group that operates independently of the government. Depending on their scope of activities, NGOs in India can be registered as a Society, Trust, or Section 80G company. NGOs can be active in a wide range of activities, both volunteer and group-based and institutional, with the overarching goal of benefiting society as a whole or a specific or vulnerable social group. Environmental, social, advocacy, education, and human rights work are just a few of the activities carried out by NGOs.

Why should non-governmental organizations (NGOs) in India apply for registration under sections 12A and 80G?

Sections 12A and 80G both have their own set of ramifications and benefits for non-profits. The following are some of the benefits:

  • An NGO can obtain tax exemption simply by registering under sections 12A and 80G – provided that certain conditions are met.
  • Only if the NGO receives a certificate under 12A and 80G can the person/entity making the donation earn tax benefits.
  • A tax credit of 50% of the donation amount will be applied to the person’s or organizations total income.
  • Only if an NGO is registered under sections 12A and 80G will it be eligible for government financing.

Criteria for NGOs to be eligible for the 12A and 80G certificates

The following are the basic eligibility requirements for 12A and 80G certificates:

  • The NGO’s assets and income should only be used for philanthropic purposes.
  • All receipts and expenditures should be correctly recorded in the books of accounts.
  • Non-governmental organizations (NGOs) should not be founded or operated for the benefit of any one religion, caste, or community.
  • The bylaws or objectives of NGOs should not include any provision for using the organization’s income or assets for anything other than philanthropic purposes.
  • If an NGO earns money from a business, the trustee should keep separate books of accounts to ensure that donations are not diverted.

Is it possible for an NGO to be excluded from 12A and 80G registration exemptions?

Yes, an NGO can lose its exemption status.

There are a few circumstances under which a donor may be unable to claim tax deductions:

  • If a charitable organization or trust that is registered as a non-governmental organization (NGO) promotes the interests of a specific religion, caste, or group.
  • If the NGOs have any ‘non exempted income,’ that is, if they are earning money for a commercial purpose.
  • If the donor pays in cash, the government has cut the allowable deduction from 10,000 rupees to only 2,000 rupees as of the 2018-2019 budget. For checks and other electronic ways of transmission, however, there is no such restriction.
  • If the NGO does not keep a regular account of expenses and receipts.
  • If the NGO isn’t registered under the Societies Registration Act of 1860 or Section 80G of the Company Registration Act of 2013, it would be considered unregistered.

Documents Required for Section 12A and Section 80G Registration

The following is a list of documents required for registration:

1. Memorandum of Association (MOA) or Trust Deed – two copies, one of which must be self-attested by the NGO’s president.

2. Received a NOC (No Objection Certificate) from the landlord where the registered office is located.

3. Self-attested copy of registration with the Registrar of Companies, Registrar of Firms and Societies, or Registrar of Public Trusts.

4. A self-certified copy of paperwork attesting to the items’ adoption and modification.

5. A copy of the NGO’s, Trust’s, or Institution’s PAN card.

6. A photocopy of the electric bill, or a bill for house taxes, or a bill for water.

7. A representation of the welfare actions carried out.

8. A list of contributors and donors, including their addresses and PAN numbers.

9. If applicable, a self-certified copy of the registration granted or denied under section 12A.

10. A description of the institution’s or trust’s general business operations.

11. A report on the NGO’s progress during the last three years since its inception.

Exemption, which will not apply in specific circumstances

The following trust/institution incomes are not eligible for an exemption:

  • The entire profit from property held in trust for private religious purposes that do not benefit the general public.
  • The entire income of a charitable trust or institution created to help a certain religious community or caste in an indirect way.
  • If the charity or religious trust or institution’s revenue (wholly or partially) and property are used for the benefit of a specific person, the entire income
  • The income of a charitable or religious trust is not invested in the way that it should be
  • Value of medical or educational services provided to a specific person by any charitable or religious trust that operates a hospital, medical institution, or educational institution.
  • Any revenue derived from business earnings and gains unless the business is ancillary to the trust’s or institution’s purposes and separate books of account are kept. Any business profits and gains unless the business is incidental to the trust / institution’s aims and separate books of account are maintained in respect of such activity.

When making a donation, there are a few things to consider.

  1. If you wish to receive tax benefits when you donate to an NGO, make sure you pay via check, demand draught, internet banking, net-banking, or debit or credit card. Donations of more than RS. 2,000 to charitable organizations should not be made in cash. If you donate cash, you will not be eligible for tax deductions.
  2. You will need to get a receipt with the amount that you have donated to the organization with its stamp as proof, for you to avail the tax benefit. Details such as the full name, address and PAN of the NGO should be clearly mentioned along with your name and the amount received from you as a donation.
  3. Check if your donation qualifies for a 100 percent tax deduction. Request the NGO for Form 58 which contains details such as the total project cost, the authorized amount, as well as the funds collected so far by the institution. Without this form, your tax claim stands rejected.

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