What is 12A registration?

If profit organizations, such as NGOs, and trusts, register under Section 12a of the Income Tax Act of 1961, they receive an exemption from income tax on their earnings, provided they use the funds solely for charitable or religious purposes.

When 12A registration is unavailable, the income of these organizations becomes taxable, potentially reducing the resources available for their activities.

Eligibility for 12A Registration

• Type of organization: It must be a trust, society or a Section 8 company.
• Purpose: Only the charitable or religious purposes of the organisation should exist.
• Financial Transparency: You have to keep proper books of accounts and financial statements.
• Registration: Entity must be registered by the concerned authority (Registrar of Societies or Companies).
• Non-Profit Motive: As long as the organization's income and assets are not otherwise benefiting members or individual trustees.

Difference Between 12A, 12AA, and 80G

1. Purpose:

• 12A Registration: If a charitable or religious organization applies this registration, its income is exempt from tax.
• 12AA Registration: The Income Tax Act lays out a process for obtaining registration under 12AA. In this regard, the Income Tax Department must scrutinize the verification and validation processes.
• 80G Registration: Donors benefit from this registration by being able to give more to charitable organizations.

2. Applicability:

• Trusts, societies, and non-profits with income tax returns are subject to 12A.
• Registration in 12A requires 12AA approval. Registration is impossible without 12AA permission.
• 80G: Organizations that can provide tax deduction advantages to donors to strengthen donations.

Documents Needed for 12A Registration

• Constitutional Documents: Trust deed (for trusts), Societies and Section 8 corporations need MOAs or AOAs.
• Organization Details: PAN card for the organization, Address proof of the organization.
• Activity Details: The organization provides updates on its charitable or religious endeavors.
• Financial Records: The company has provided audited financial statements for the last three years, if available.
• Bank Details: A copy of the organization's bank statement or passbook is required.
• Trustee Information: The trustees or key members must provide identity proof and address proof.

Step-by-Step Process for 12A Registration

1. Prepare necessary documents.
2. Register on the Income Tax Portal.
3. Fill out Form 12A.
4. Attach supporting documents.
5. Submit the application.
6. Respond to questions.
7. Receive the   .

Cost of 12A Registration

The 12A registration process is free of charge when applied directly through the Income Tax portal. However, organizations may incur costs if they hire professionals for assistance with documentation and filing.

Frequently Asked Questions (FAQs)

1. What is 12A registration?

   12A registration is a certification under the Income Tax Act that enables charitable organizations to claim tax exemptions on their income. It ensures that income invested in charitable endeavors is not subject to taxation.

2. Is 12A registration compulsorily required for trusts?

   Yes, trusts, societies, and Section 8 companies are required to obtain registration under Section 12A to avail exemptions in income tax. Without it, their income will be taxed as regular income.

3. What is the validity of 12A registration?

   12A registration generally has indefinite validity unless specifically revoked by the Income Tax Department. Organizations must maintain compliance to retain the benefits.

4. How much is the registration fee for 12A?

   There is no fee officially charged by the Income Tax Department for 12A registration. However, organizations may incur costs if they engage professionals or consultants to assist with the process.

5. Can I submit applications for both 12A and 80G simultaneously?

   Yes, organizations can apply for both 12A and 80G registration simultaneously. 12A provides income tax exemptions for the organization, while 80G offers tax benefits to donors, encouraging donations.

6. What distinguishes 12A registration from 80G registration?

   12A registration pertains to the exemption of the organization's income from taxation. In contrast, 80G registration incentivizes donors by offering tax deductions for their contributions.

7. What documents are required for 12A registration?

   The necessary documents include:

   • Trust deed or MOA/AOA
   • PAN card of the organization
   • Audited financial statements (if available)
   • Identity and address proofs of trustees or members
   • Details of charitable activities conducted
8. Is a trust without 12A registration taxable?

   Yes, a trust or organization without 12A registration is fully taxable. Its income will be treated as regular income under the Income Tax Act, significantly reducing funds available for charitable activities.

9. How do I apply for 12A registration online?

   To apply online:

   • Visit the Income Tax e-filing portal.
   • Log in with the organization’s PAN credentials.
   • Fill out Form 12A and attach the required documents.
   • Submit the application and respond to any verification queries.
10. What is Section 12AA of the Income Tax Act?

    Section 12AA outlines the procedural framework for granting registration under Section 12A. It involves evaluating and validating the organization’s application for compliance.

11. What is Form 12A of the Income Tax Act?

    Form 12A is used for applying for registration under Section 12A. It requires details about the organization, trustees, and previous charitable activities.

12. Is 80G registration mandatory?

    No, 80G registration is not mandatory. However, it helps organizations attract donations by offering tax benefits to donors. Organizations must have 12A registration to apply for 80G.