What is the meaning and significance of Sections 80G and 12A of the Income Tax Act?
Section 80 G
The Income Tax Department grants an 80G certificate to non-governmental organizations (NGOs), including charitable trusts and Section 8 companies. This certificate enables such organizations to receive donations from individuals or entities, while also allowing donors to claim tax benefits. Donors contributing to an 80G-registered entity are eligible for a tax deduction of 50% of the donated amount from their Gross Total Income. To claim this exemption, the donor must obtain a signed donation receipt from the organization, which should include details such as the organization’s name, PAN, and the date of donation.
Under Section 80G of the Income Tax Act, donations made to specified charitable institutions or relief funds qualify for tax deductions. However, not all contributions are eligible — only donations made to funds or institutions prescribed under the Act can be claimed.
The deduction under this section is available to all categories of taxpayers, including individuals, companies, firms, and other entities. It is important to note that only monetary donations made through cheque, draft, or cash are eligible for deduction. Contributions made in kind, such as goods or services, do not qualify for a tax benefit under Section 80G.
Section 12A
Section 12A of the Income Tax Act lays down the provisions for the registration of charitable trusts, religious institutions, and non-profit organizations in India. Registration under Section 12A is a prerequisite for such entities to claim exemption from income tax on their income.
In essence, when a trust or institution is registered under Section 12A, its income is not taxed, provided it is applied towards charitable or religious purposes as defined under Section 2(15) of the Act. The registration is granted by the Income Tax Department after verifying the organization’s objectives, activities, and compliance with prescribed norms.
Without registration under Section 12A, even if an entity carries out charitable activities, its income will be subject to taxation. Therefore, obtaining 12A registration is crucial for NGOs, charitable trusts, and Section 8 companies seeking income tax exemption and eligibility for other related benefits under the Act.
What is the procedure for obtaining registration under Section 12A?
âž² Make application 10A
On receipt of an application for the registration of a trust or institution, the Principal Commissioner or Commissioner shall
- request certain documentation or details from the trust or institution as he deems necessary to satisfy himself
- the authenticity of the activity of the trust or institution; and
- the compliance by the trustor institution of the provisions of any other law for the time being in effect for the purposes of fulfilling its purposes and may also make such inquiries as may be considered appropriate in that cases
âž² Granting of Certificate
After being satisfied with the objects of the trust or institution and the authenticity of its operations and compliance with the criteria, he passes a written order registering the trust or institution, If he can not be so satisfied, he shall pass an order in writing refusing to register the trust or entity and a copy of that order shall be sent to the applicant.
Please notice that no order shall be passed until a fair opportunity has been given to the applicant for hearing.
Once the registration certificate is issued under 12A then it will remain valid for a lifetime.
What documents are required for obtaining 12A registration along with Form 10A?
âž² Copy of registration certificate of trust or NGO (Trust deed or registration certificate long with MOA in case of section 8 or society)
âž² PAN copy
âž² Three-year bank account statement
âž² Landowner NOC (were the organization is situated)
âž² Detail of governing bodies of the organization
âž² List of contributors along with PAN
âž² Detail of securities or shares or property purchased by or on behalf of the organization.
âž² Required declaration by authorized person.
âž² PAN and Adhar of trustees and members
âž² Trust deed/ MOA & AOA (in case of society or section 8)
What conditions must be fulfilled to obtain registration under Section 80G?
âž² Organization must be registered under located in India for charitable purposes.
âž² Where the organization or fund receives any income, that income shall not be liable for inclusion in its total profits under the provisions of Sections 11and 12 or Section 10 section (23AA) or section (23C)
âž² If the entity or fund receives any income that is profits and business gains, the requirement that such income is not liable to be included in its overall income under the provisions of section 11 shall not apply in respect of such income if:
- The institution or fund shall maintain separate account books for such business;
- contributions made to the institution or fund shall not be used directly or indirectly by the institution or fund for the purposes of such business;
- The company or fund issues a certificate to the individual making the donation to the effect that he keeps separate account books for that business and that the contributions he collects are not used, directly or indirectly, for the purposes of that business;
âž² The statute by which the organization is formed shall not include any provision for the transfer or application for any reason other than charitable purposes of the income or properties.
âž² The organization does not support any religious group or caste in particular.
âž² The institution should be either a Public Charitable Trust or a registered corporation or a corporation registered under the Companies Act'2013, or a law-established university, or any other educational institution recognized by the Government or a law-established university, or affiliated with any law-established university, or a fully or partially funded college or is an institution financed wholly or in part by the Government or local authority.
What is the procedure for obtaining registration under Section 80G?
As per rule 11A of income tax rules, 1962 following process must be followed for seeking registration under 80G:
âž² Any institution's request for approval shall be in the form no. 10 G verified by the person authorized to verify the return of income under section 140, as applicable to the assessee.
âž² Form No. 10 G shall be furnished electronically, —
- under digital signature, if the return of income is required to be furnished under digital signature, or
- by electronic verification code in a case not protected by clause I
âž²The Principal Director-General of Income-tax (Systems) or the Director-General of Income-tax (Systems), as the case may be, shall lay down the data structure, standards and procedure for the furnishing and verification of Form No. 10 G and shall be responsible for formulating and implementing effective security, archival and retrieval policies in relation to that form so furnished.
âž² Where the Principal Commissioner or Commissioner is satisfied that the applicant meets all the requirements set out in section 80G(5), he shall record such satisfaction in writing and grant approval in compliance with section 80 G of clause (vi) of subparagraph (5).
âž² Where the Principal Commissioner or Commissioner is satisfied that one or more of the conditions set out in section 80G(5) have not been met, he shall state the reasons in writing and deny the request for approval after giving the applicant an opportunity to be heard
What documents are required for obtaining 80G registration along with Form 10A?
- Copy of registration certificate of trust or NGO (Trust deed or registration certificate long with MOA in case of section 8 or society)
- PAN copy
- Three-year bank account statement
- Landowner NOC (were the organization is situated)
- Detail of governing bodies of the organization
- List of contributors along with PAN
- Detail of securities or shares or property purchased by or on behalf of the organization.
- Required declaration by authorized person.
- PAN and Adhar of trustees and members
- Trust deed/ MOA & AOA (in case of society or section 8)