12A Registration
12A Registration is a process under the Income Tax Act, 1961, that allows non-profit organizations (like NGOs, charitable trusts, and societies) to obtain tax exemption on their income. Once registered, these entities can receive donations and other income without paying income tax, which enables them to use funds directly for charitable purposes.
Significance of 12A Registration
- Tax Exemption: Income of an NGO or charitable institution registered under 12A is exempt from tax.
- Donor Benefits: Donors to 12A-registered organizations can avail of tax deductions, increasing their likelihood of contributing.
- Increased Credibility: 12A certification adds legitimacy, making it easier for organizations to seek grants and donations.
- Access to Government Grants: Only 12A-registered organizations are eligible to apply for government funding and grants.
Eligibility Criteria for 12A Registration
To be eligible for 12A Registration, an entity must:
- Be registered as a non-profit organization in India (NGO, charitable trust, society).
- Operate for a charitable, religious, or educational purpose, as defined under Section 2(15) of the Income Tax Act.
- Use its income and donations solely for the objectives stated in its founding documents.
- Not distribute profits or surplus to members or individuals.
12A Registration Process
- File Form 10A with the jurisdictional Commissioner of Income Tax (Exemptions) through the income tax e-filing portal.
- Upload required documents, such as the entity's founding documents, PAN, NOC from the landlord (if operating from a rented property), and financial records.
Application Submission (Form 10A):
- The Income Tax Department reviews the application, verifying the authenticity of the entity and its charitable activities.
Verification and Examination
- Upon successful verification, a 12A Registration Certificate is issued.
- This certificate is typically valid indefinitely (unless revoked) but requires renewal if issued under provisional registration.
Issuance of 12A Certificate:
- As per recent amendments, NGOs need to renew 12A Registration every five years to maintain compliance and retain their tax-exempt status.
Renewal
Tax Savings with 12A Registration
- 100% Exemption: 12A-registered organizations are exempt from paying income tax on donations and other income, provided they use these funds for charitable purposes.
- Example Calculation:
- Suppose an NGO receives a donation of ₹10 lakhs and uses 85% of it (₹8.5 lakhs) towards charitable work while saving 15% (₹1.5 lakhs) for future activities.
- Under 12A registration, the full ₹10 lakhs would be tax-exempt, reducing the tax burden entirely and allowing funds to be directed to charitable activities.
- Variation by Entity Type: Charitable trusts, societies, and Section 8 companies (under the Companies Act) can apply for 12A registration. The tax benefits remain consistent across entity types, but certain additional state-specific rules may apply, depending on where the NGO operates.
Documents Required for 12A Registration
- PAN card of the NGO
- Copy of the trust deed (for trusts) or MOA and AOA (for societies and Section 8 companies)
- Details of activities conducted
- Audited financial statements (last three years, if applicable)
- NOC from the landlord, if premises are rented
FAQ
Frequently Asked Questions
These FAQs cover essential details like eligibility, required documents, process steps, and benefits. It helps clarify common queries about setup, compliance, costs, and timelines.
12A Registration is a tax exemption certificate that allows NGOs and charitable entities to receive income without paying tax on it.
Non-profit organizations like NGOs, charitable trusts, and societies operating for educational, charitable, or religious purposes.
No, 12A is restricted to non-profit organizations that meet the charitable purpose criteria.
It typically takes about 2-3 months after application, subject to verification and approval.
Yes, unless revoked, but recent amendments mandate renewal every five years.
Registered entities are exempt from income tax on donations and income used for charitable purposes.
Indirectly, as donors may feel more confident in donating to certified, tax-exempt organizations.
No, 12A registration is non-transferable.
The organization would lose tax-exempt status and be required to pay income tax on received donations and earnings.
Yes, 12A is governed by the central Income Tax Act, so rules are generally uniform across states.
Only non-profit Section 8 companies (under the Companies Act) are eligible for 12A registration.
Yes, most government grants require the recipient to be 12A registered.
No, foreign contributions are covered separately under the FCRA (Foreign Contribution Regulation Act).
No, tax exemption applies only from the date of 12A registration onwards.
Operating without registration subjects income to standard income tax rates, reducing funds for charitable purposes.
Yes, if the entity violates the Income Tax Act’s provisions, the Income Tax Department can cancel its registration.
No, 12A affects only income tax; GST exemptions are governed separately.
Yes, and donations are tax-exempt if used for charitable purposes.
12A exempts the NGO’s income from tax; 80G offers tax benefits to donors who contribute.
Yes, entities must file annual returns to maintain tax-exempt status and comply with IT regulations.
12A registration is a critical step for non-profit organizations in India to gain tax exemption and credibility. For guidance on the application process or any compliance needs, YathraFin can assist in ensuring a smooth and accurate registration experience!