Section 12AB and Section 80G Registration

NGO (Non-Government Organization) is established to serve for the cause of human, nature, animals with a non-profit motive by forming any type of entity like Charitable Trust, Society, or Section 8 Company. Once registered, there are numerous tax benefits and exemptions for the NGO as well as for the donors. To avail such exemptions, it is required to obtain 12AB and 80G registrations; otherwise, any income or donation received by an NGO will be considered as normal taxable income.

Introduction

In the Union Budget of 2020, the Honourable Finance Minister introduced a major change for granting exemption under Section 12AA, 12AB, and donation under Section 80G to trusts, societies, and other charitable establishments. Notably, the provisions under Section 12A ceased to exist after 31.03.2021, making it crucial to understand the registration process under Section 12AB. This new process enhances digitalization and transparency in the registration system.

Advantages of 12AB and 80G Registration

  • Tax Exemptions for NGOs: NGOs registered under these sections can receive donations without being taxed.
  • Tax Exemption for Donors: Donors can claim tax deductions on donations made to NGOs.
  • FCRA Registration: NGOs can also apply for FCRA registration to receive international funding.

What is Section 12AB?

Section 12AB is an amendment related to the compliance and registration process of religious or charitable trusts and institutions, replacing Section 12AA of the Income Tax Act.

Organizations registered under Section 12AB enjoy income tax exemption on surplus income. Section 8 Companies, Trusts, and NGOs with 12AB registration benefit from tax exemptions and enhanced credibility.

Applicability of Section 12AB

All charitable and religious institutions (including NGOs) registered under the following sections must re-register under Section 12AB:

  • Section 12A (earlier registration requirement for NGOs and trusts)
  • Section 12AA (introduced online trust registration system)
  • Section 10(23C) (provides specific exemptions to government and non-government educational institutions)
  • Section 80G (deductions for donations to charitable organizations)

Reasons for Introducing Section 12AB

  • The earlier process was manual and time-consuming; digitalization simplifies registration.
  • The new process limits registration validity to five years, ensuring periodic scrutiny.
  • Helps prevent fraudulent NGO activities through periodic reassessments.

Registration Process for Section 12AB

Case 1: Already Registered Entities

Organizations registered under Section 12A or 12AA must apply for new registration under Section 12AB before 30.06.2021. The new registration remains valid for five years.

Case 2: Provisionally Registered Charitable Institutions

Provisional registration under Section 12AB remains valid for three years from the date of grant.

Steps to Apply for Section 12AB Registration

  1. File Form 10A online at www.incometaxindiaefiling.gov.in.
  2. Provide details such as:
    • Name of the entity
    • PAN details
    • Registered address
    • Type of organization (Religious/Charitable/Religious-cum-Charitable)
    • Authorized person's contact details
    • Objects of the entity
    • Modifications in objectives (if any)
    • Previous registration approvals/rejections (if any)
    • FCRA registration details (if applicable)
  3. The Income Tax Commissioner will verify the application and may request additional documents.
  4. Upon approval, the Commissioner issues Form 10AC, granting registration along with a 16-digit Unique Registration Number (URN).

Documents Required for Section 12AB Registration

  • Registration Certificate & MOA/Trust Deed (self-attested by the Managing Trustee)
  • No Objection Certificate (NOC) from the landlord (if office is rented) along with an electricity bill
  • PAN card of the trust
  • Financial statements & ITRs (for the last three years, if applicable)
  • List of governing members
  • Trust Deed
  • Activity/progress report (past three years)
  • Donor details
  • Bank statements (last three years)
  • Any other document as requested by the Income Tax Department

Registration under Section 80G

Section 80G registration allows an NGO or charitable institution to provide tax benefits to donors. Organizations can apply for Section 12AB and 80G registration together or separately after obtaining 12AB registration.

Conditions for Section 80G Registration

  • The entity must be established in India for charitable purposes.
  • Income must be exempt under Section 11, Section 12, or Section 10 (23AA/23C).
  • If the entity has business income:
    • Separate books of accounts must be maintained.
    • Donations must not be used for business.
    • MOA/by-laws should prohibit income transfer for non-charitable purposes.
  • The institution must not benefit any specific religious community or caste.
  • Regular books of accounts must be maintained.

Procedure for Section 80G Registration

  1. File Form 10G with the Jurisdictional Principal Commissioner of Income Tax.
  2. The Commissioner verifies the documents and NGO activities and may request additional details.
  3. If satisfied, the Commissioner grants approval in writing; otherwise, the application is rejected after allowing the applicant a hearing.

By securing Section 12AB and Section 80G registrations, NGOs can operate effectively with tax exemptions while offering incentives for donor contributions. This ensures compliance and fosters transparency in charitable operations.

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