Section 12AB and Section 80G

Overview of Section 12AB & 80G Registration

In the 2020 Union Budget, the Finance Minister introduced significant changes regarding the registration process for charitable organizations under sections 12AB and 80G of the Income Tax Act. These changes aim to streamline the process, increase transparency, and ensure compliance, allowing non-profits to access tax exemptions and donations while contributing to the overall digitalization of the registration system.

Section 12AB Registration

What is Section 12AB?

Section 12AB is an amendment introduced to modify the registration process for charitable and religious institutions. It replaces the previous sections (12A and 12AA) under which such organizations were granted tax exemptions. This new system aims to ensure more transparency and better oversight of non-profit activities.

Who is Eligible for Section 12AB Registration?

The following organizations are required to switch to Section 12AB registration:

• NGOs, trusts, and societies already registered under Section 12A or 12AA.
• Charitable or religious institutions receiving specific exemptions under Section 10(23C).
• Institutions registered under Section 80G.

Benefits of Section 12AB Registration

1. Tax Exemption for NGOs: NGOs enjoy exemptions from income tax on surplus funds.
2. Time-bound Registration: Registration under Section 12AB is valid for 5 years, ensuring periodic review and reducing the possibility of fraudulent activities.
3. Improved Transparency: The new digital registration process enhances transparency and reduces manual intervention.
4. Continued Exemption: Organizations already registered under previous sections can continue enjoying tax benefits after switching to Section 12AB.

Documents Required for Section 12AB Registration

1. Registration Certificate and Trust Deed (self-attested by the Managing Trustee).
2. PAN Card of the Trust.
3. Books of Accounts, financial statements, and Income Tax Returns for the past 3 years.
4. List of Governing Body Members.
5. No Objection Certificate from the landlord (if the premises are rented).
6. Bank Account Statement for the past 3 years.
7. Activity Report or Project Report for the last 3 years.
8. Details of Donors.

Procedure for Registration under Section 12AB

1. Apply through Form 10A on the Income Tax e-filing website.
2. Fill in basic details such as the name of the organization, PAN, legal status, and objectives.
3. Upload the necessary documents.
4. After submission, the Commissioner verifies the details. If satisfied, a unique registration number (URN) is issued.

Section 80G Registration

What is Section 80G?

Section 80G allows donors to claim a tax deduction for donations made to registered charitable institutions. When an NGO or charitable organization is registered under Section 80G, it can offer tax exemptions to its donors, making donations more attractive.

Benefits of Section 80G Registration

1. Tax Benefits for Donors: Donors can claim deductions for their contributions under Section 80G of the Income Tax Act.
2. Increased Donations: Organizations registered under 80G are likely to attract more donors due to the tax benefits.
3. Enhanced Credibility: It boosts the credibility of the organization, making it more trustworthy to potential donors.

Eligibility for Section 80G Registration

To qualify for Section 80G registration, the organization must:

1. Be established for charitable purposes in India.
2. Maintain separate books of accounts for any business activities.
3. Not be run for the benefit of a specific religious community or caste.
4. Regularly maintain records of receipts and expenditures.

Documents Required for Section 80G Registration

1. Trust/Society Registration Certificate.
2. PAN Card of the organization.
3. List of Governing Body Members.
4. Annual Financial Statements for the past 3 years.
5. Bank Account Details of the organization.
6. MOA/Trust Deed outlining charitable activities.

Procedure for Registration under Section 80G

1. Apply via Form 10G on the Income Tax Department’s e-filing portal.
2. Provide necessary details and documents to the Jurisdictional Principal Commissioner.
3. The Income Tax Commissioner verifies the documents and activities.
4. If satisfied, the Commissioner grants the 80G registration. If not, the application may be rejected.