What is 12A and 80G Registration?

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Non-government organizations have made a considerable contribution towards India’s social and economic development.

The top 200 non-profits in India are in the annual budget range of ₹ 10 crore to 800 crore.

These NGOs depend upon grants, donations, and other kinds of contributions for their subsistence and achievement of objectives. To encourage donations to these organizations, the Government grants 12A and 80G registration. Let us understand these registrations in a better way.

12A Registration

Under Section 12A of the Income Tax Act of 1961, a tax rebate is granted to NGOs. It exempts them from paying tax on income received from grants, donations, and other contributions to the organization. This registration is compulsory for NGOs that want to avail exemptions under Section 12A.

80G Registration

Registration under 80G allows donors to avail of tax exemption on donations made to NGOs. This facilitates more donations towards the welfare activities of these organizations. This means that 80G registration is not mandatory and can only be availed if a person donates to an NGO that has 12A registration.

Understanding Sections 12A and 80G of the Income Tax Act

Section 12A

Section 12A lays down conditions under which NGOs can apply for Sections 11 and 12 of the Income Tax Act. Section 11 excludes certain kinds of income from the total taxable income, while Section 12 includes any voluntary contributions received as grants and donations for charitable and religious purposes.

Section 80G

Section 80G clause (1) specifies the deduction of certain donations from taxable income. Clause (2) specifies the type of contributions that fall within its ambit. NGOs should have 12A registration, be registered in India, and use these funds only for charitable or religious purposes.

Eligibility for 12A and 80G Registration

For 12A Registration

 

  1. Nature of the Organization:The organization should be a trust or institution established exclusively for charitable or religious purposes.
  2. Charitable Activities: Activities should be such that they would accomplish the charitable objectives of the organization and not be based on making profits.
  3. Registration: The organization should be registered as a trust, society, or Section 8 company.
  4. Utilization of Income: Income should be used only for charitable or religious purposes and not for individual benefit.
  5. Maintenance of Books and Accounts: Proper accounts of income, expenditure, and activities should be maintained.
  6. Regular filing of Returns: Timely filing of returns of annual income tax must be made to maintain the status of exemption from tax.
  7. No Political Activities:The organization cannot take part in political activity or favour political parties.

For 80 G Registration

  1. Nature of the Organization: This applies to non-profit organizations such as trusts, societies, and Section 8 companies established for charitable or religious purposes.
  2. 12A Registration: The NGO has to have 12A registration.
  3. No Non-Charitable Use of Income:Funds must be used only for charitable activities.
  4. Non-Exclusivity of Beneficiaries:The organization should benefit a broad spectrum of society and not just a specific religious community or caste.
  5. Regular Accounting: Proper and regular accounts of financial transactions shall be maintained.

Documents Required for 12A and 80G Registrations

The following documents have to be submitted by the NGOs to complete the registration procedure:

  1. Self-certified copy of the trust deed or any other document relating to the creation of the organization.
  2. Self-certified registration certificate of the institution and its Memorandum of Association or Byelaws.
  3. FCRA Registration Certificate, if available.
  4. Annual accounts of the organization for the last three financial years.
  5. Audit report by a Chartered Accountant, if required
  6. NGO Darpan ID.

How to Get 12A and 80G Registration?

Step-by-Step Process

 

  1. Formation and Registration of NGO: Structuring of the legal framework for the NGOs, either trust, society or Section 8 company and getting the same registered with the concerned authority.
  2. Collection of documents:All the documents required for registration should be collected.
  3. Application Form Preparation: Fill out Form 10A with correct information related to the various objectives and activities of the organization.
  4. Application Form Submission:File Form 10A, together with other required documents, before the Income Tax Commissioner or through the Income Tax Website.
  5. On-Site Inspection:The tax department scrutinizes the application. It might inspect the working pattern and books of records of the organization.
  6. Registration Decision: Based on the scrutiny, the tax department registers or rejects the application for registration.
  7. Registration Intimation: Get the official registration certificate for approval.

Validity of 12A and 80G Certificates

All the initial registrations are provisional and have a validity period of three years. NGOs should apply for renewal six months before expiry or within six months of commencing activities. Renewed registrations are valid for five years.

Benefits of 12A and 80G Registrations

  1. Tax Exemptions for Donors:Donations made to NGOs with 80G registration are tax-deductible.
  2. Advanced Credibility and Trust:Official registrations bring about increased credibility for any organization.
  3. Better Fund-Raising Potential: Tax exemption encourages more donations.
  4. Government Grants:It is a prerequisite for many government grants.
  5. Long-term Sustainability: It helps the NGOs to find sources of funding that are sustainable in the long term.
  6. Efficient Use of Resources:The funds can be spent only for charity.

Expert Assistance for 12A and 80G Registrations

Vedkee Associates shall extend complete support for 12A and 80G registrations. They have online consultations; their services are quite transparent and affordable. Contact us to continue to get yourself registered for 12A and 80G.

Call us at +91 981-023-8067

Frequently Asked Questions

1. What is Section 12A registration?

Section 12A registration allows tax exemption on income made by non-profit institutions from grants and donations which is used solely for charitable or religious purposes.

2. Who can apply for Section 12A registration?

Registered non-profit entities like trusts, societies, and Section 8 companies set up for charitable purposes in India can apply for Section 12A registration.

3. Can an NGO avail of both 12A and 80G registrations simultaneously?

No, 80G registration can only be obtained after obtaining 12A registration.

4. What are the chief advantages of 80G registration for donors?

It is a tax-deductible amount that the donors can claim, the avenue becomes quite appealing to support charitable causes.

5. How does registration under 80G increase an NGO’s fundraising potential?

More generous donations due to tax benefits will come to the organization.

Also read:

Understanding FCRA Registration in India

Vedkee

Understanding FCRA Registration in India

Societal and environmental concerns have been in the limelight for quite a long time in the present world scenario. Business houses do not only focus on money-making as their sole agenda but are also involved in practices that uplift society and the environment.

In the developing world scenario, where connectivity has brought countries closer ,furnace currency transactions are common. This continuous exchange of money coined the requirement of the Foreign Contribution Regulation Act, of 2010.Â

What is FCRA?

The Foreign Contribution Regulation Act, 2010 is a legislation for:

  1. Regulating foreign contribution: It regulates the receipt and utilization of foreign donations by any individual, association or company in India.
  2. National Safety: It disallows any foreign contribution that is utilized for activities detrimental to the national interest.

Who Can Register for FCRA?

There are two kinds of FCRA registrations:

  • Normal Registration
  • Prior Permission Registration
  • Normal Registration

To be eligible for Normal Registration, an organization shall:

  1. Be registered: This may be under the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or as a Section 8 Company under the Companies Act, 2013.
  2. Work toward the betterment of society: Organization should be involved in society-aiding activities.
  3. Have a financial history: In the last three years, it must have spent at least ₹10,00,000 on activities toward its social goals (excluding administrative costs). Financial statements for the past three years, should be duly audited by qualified Chartered Accountants need to be presented.
  • Prior Permission Registration

This applies to newly registered organizations and their receipt of foreign contribution for specific purposes. For the same, an organization would need to:

  1. Be a registered entity: This may be under the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or as a Section 8 Company under the Companies Act, 2013.
  2. A Letter of Commitment by Donor: The letter should specify the amount being contributed, the purpose of the contribution, and details of the donor.

Documents to Be Attached for FCRA Registration

In support of registration under FCRA, an association has to attach certain important documents in a particular format and size. These are as follows:Â

  1. Registration Certificate of Association: It shall be a PDF file, not exceeding 1 MB in size.
  2. Memorandum of Association/Trust Deed: The document showing the aims and objects of the association shall be attached as a PDF with a maximum size of 5 MB.
  3. Activity Report for the Last Three Years: The report mentioning activities taken up by the association in the last three years. It shall be in PDF format not exceeding 3 MB in size.
  4. Audited Statement of Accounts for the Last Three Years: It consists of a financial statement that has to be audited by a properly qualified Chartered Accountant. The scanned documents are to be submitted in PDF format with a maximum size of 5 MB.
  5. Affidavit of Each Key Functionary: The affidavit of each key functionary of the association. The maximum size of the PDF file shall not exceed 1 MB.
  6. Chief Functionary Signature: Image files of dimension 140 (Width) x 60 (Height) pixels and maximum size 50 KB.
  7. Association Seal: The seal should also be uploaded as an image file of the same size, 140 x 60 pixels.

Ensuring the following documents are in the correct format and size is quite crucial for successful form submission.

ÂHow to Apply for FCRA Registration?

The step-by-step process for submitting an application form for FCRA registration is as follows:

  1. Visit the FCRA online portal.
  2. Choose the appropriate form: FC-3A for FCRA Registration and FC-3B for FCRA Prior Permission.
  3. New registration: Register and generate a username and password
  4. Login: Log in with the created username and password.
  5. FCRA Registration: Select from the drop-down FCRA Registration and click on “Apply Online”.
  6. Fill in the details: Open the FC-3 menu and fill in the association form with details like Darpan ID (optional), association address, registration number, registration date, nature of the association, and main objectives. Upload the required documents.
  7. Executive committee details: Fill in the details of key functionaries and save the information.
  8. Bank details: Bank name, account number, IFSC code, and bank address should be duly filled.
  9. Upload documents: Scan all the documents required to be attached to the application in PDF format and upload them.
  10. Final step: Mention place and date and click final submission. Then make the online payment to complete the application.

Validity and Renewal

After the registration has been granted, FCRA registration shall be valid for five years. The renewal application shall have to be made six months before the expiry of the validity of the certificate of registration.Â

By following these steps, organizations can legally and effectively receive and utilize foreign contributions under the FCRA, 2010.Â

 FAQs regarding FCRA Registration

  1. What is the purpose of the Foreign Contribution Regulation Act (FCRA), 2010?

The FCRA, 2010, is a regulatory measure on the acceptance and utilization of foreign contribution or foreign hospitality availed of by any person, association, or company in India. It also ensures that such contributions are not used in ways that harm national interests.

  1. Who can get Normal Registration under FCRA?

Organisations that can be registered under Normal Registration shall be registered either under the Societies Registration Act, 1860 the Indian Trusts Act, 1882, or as a Section 8 Company under the Companies Act, 2013. It shall have spent at least ₹10,00,000 on activities benefiting society in the last three years and attach audited financial statements for those years.Â

  1. What are the documents required for FCRA registration?

Documents to be attached to the application form include the Registration Certificate of the Association, Memorandum of Association/Trust Deed, Activity Report for the last three years, Audited Statement of Accounts for the last three years, affidavits of each key functionary, the Chief Functionary’s signature, and the Association’s seal.

  1. How does Prior Permission Registration differ from Normal Registration?

Prior Permission Registration is for newly registered organizations desirous of receiving foreign contributions for specific purposes. It requires a commitment letter from the donor and should satisfy additional conditions if there are common members between the Indian and foreign organizations.

  1. What is the period of validity of FCRA registration, and when is it to be renewed?

FCRA registration is valid for five years. The organizations have to apply for renewal six months prior to the expiry date to continue receiving foreign contributions legally.

 Also read: Pvt Ltd Company Registration with Vedkee Associates, Documents Required for Startup India Registration, Guide On GeM Portal Registration

Private Limited Registration

Partnership Firm Registration

Introduction

A Private Limited Company (Pvt Ltd) is a business entity privately owned by a small group of shareholders or members. Unlike public limited companies, the shares of a private limited company are not publicly traded on a stock exchange. The shares of a private limited company are, therefore, held privately, meaning ownership and control are restricted to a few or some individuals. This structure is preferred by small to medium-sized enterprises (SMEs) due to its flexibility, legal recognition, and ability to limit liability for its shareholders.

Types of Private Limited Companies

  1. Company Limited by Shares

In a private company limited by shares, shareholders‘ liability is restricted to the unpaid amount on their shares. This means that a shareholder’s liability is limited to the nominal value of the shares held, as specified in the  of AssoMemorandumciation (MOA).

  • Shareholders cannot be compelled to contribute more than the unpaid amount of their shares, even in the event of insolvency or liquidation.
  • This structure has financial security for the shareholders; it is the most common form of private limited companies.
  1. Company Limited by Guarantee

In this private limited company, the members’ liability is limited to the amount they guarantee to contribute to the company’s assets in case of winding up.

  • This structure is often used by
  •  or companies with charitable purposes, where capital investment is not a primary concern.
  • Members are liable only for the guaranteed amount and not for any additional debts or obligations of the company.
  1. Unlimited Companies

An unlimited company does not impose any limits on the liability of its shareholders.

  • Shareholders may be required to cover the company’s debts and liabilities in case of liquidation.
  • Despite unlimited liability, the company retains a separate legal identity, meaning creditors cannot directly sue individual members unless the company is wound up.
  • This structure is rare due to the high risk it poses to shareholders.

Key Features of a Private Limited Company

  1. Separate Legal Entity:ÂA private limited company is considered a separate legal entity from its shareholders, allowing it to own assets, incur liabilities, and enter contracts independently.
  2. Limited Liability:ÂShareholders’ assets are protected, as their liability is limited to their investment in shares or the guarantee provided.
  3. Perpetual Succession:ÂThe company’s existence is not affected by the death or departure of any shareholder. Ownership can be transferred, ensuring continuity of business operations.
  4. Restrictions on Share Transfer:ÂShares in a private limited company cannot be freely transferred, maintaining control within a close group of shareholders.
  5. No Minimum Paid-Up Capital Requirement:ÂUnder the Companies Act 2013, there is no minimum capital requirement for setting up a private limited company in India.

Advantages of a Private Limited Company

  1. Limited Liability Protection
    Shareholders enjoy limited liability, ensuring their personal assets are protected from business liabilities.
  2. Separate Legal Identity
    Since a private limited company is a separate legal entity, it can own property, borrow funds, and sue or be sued in its own name.
  3. Ease of Raising Capital
    Private limited companies can raise capital through private placements or by issuing shares to existing shareholders, making it easier to fund expansion.
  4. Credibility and Trust
    Private limited companies are legally registered entities, which enhances their credibility with customers, suppliers, and financial institutions.
  5. Attracts Talent
    Private Limited companies can offer employee stock options (ESOPs), which help attract and retain top talent.

Disadvantages of a Private LimitedCompliance Cost

  1. Private Limited Company is pretty regulated and complaint. It holds annual filings, audits, board meetings, among others.
  2. Prohibition of share transfer
    Inhibiting a share transfer offers protection to ownership while it also severely restricts exit from the organisation or selling any stake in a company.
  3. Set up and Maintaining Cost
    Cost of raising a private company and maintaining itself may be rather more than raising a sole-proprietor or a partnership.

Key Takeaways

  1. Government Eases Compliance Norms for MSMEs
    In a recent move to promote small and medium-sized enterprises (SMEs), the government has relaxed several compliance norms for private limited companies falling under the MSME category.
  2. Increase in Incorporation of Private Limited Companies
    According to the Ministry of Corporate Affairs (MCA), there was a considerable increase in the incorporation of private limited companies in the last financial year. The reason for this increase was easy registration and government initiatives like Startup India.
  3. Introduction of SPICe+ Portal
    The MCA has launched the SPICe+ portal, which offers a single-window platform for incorporating private limited companies, GST registration, EPFO, ESIC, and professional tax registration.