An individual or corporate body has a distinct revenue stream. If their revenue crosses a specific threshold, they must pay the government a specific percentage of taxes. The Income Tax Act has a number of separate sections that help different taxpayers in various ways. NGOs and Charitable Trusts also profit from tax exemptions under Section 12A, which allows them to avoid paying taxes if they act for the good of the community and therefore do not benefit through their profits.

When the NGO is formed, they must file under Section 12A in order to seek exclusion under Sections 11 and 12 of the Act. Section 12A of the Income Tax Act of 1961 allows non-profit organizations like Charitable Trusts, Non-Profit Organizations, Welfare Societies, Religious Institutions, and others to seek absolute tax-exempt status. Non-profit organizations do not exist for profit, but instead for the benefit of individuals and society, and thus are called non-profits. They are given tax deductions because their job is deemed a selfless gesture because they simply do the function that the government can do.

Financial transactions or transactions through any non-profit trust or NGO which has not approved for 12A will be deemed taxable.

Such privileges are not available to private or family trusts, and they are unable to register under 12A.

Must ReadWhat is Section 80C?

Section 12A Eligibility

The Department of Income Tax establishes the qualifying requirements for Section 12A enrollment. According to the requirements, incorporated trusts, Section 8 corporations, and societies that offer public goods without generating revenue are liable for Section 12A approval. To be considered for the grant, trusts or associations may be religious, welfare, or charitable. Individual trusts or societies, or trusts or societies held solely by family members, are not qualified for Section 12A registration. Once a trust or association has been determined to be qualified, they should complete the 10A form with an online application. The claimant trust or entity must have a digital signature in order to file Form 10A.

The electronic identification code can be used to register the 10A form digitally.

Other primary papers for trusts, associations, and organizations are needed when applying for Section 12A, in addition to the 12A application form. The needed evidence is.

  • Copy of a company’s or a public trust’s or a firm’s or society’s registration with the registrar.
  • Copy of the trust or organization’s establishment that has been self-certified.
  • Documents endorsing the trust’s or society’s creation.
  • Self-attested paper copies of the trust or society’s annual account.
  • The trust or community should have a note outlining all of the operations in depth.
  • A self-certified report with a current order authorizing registration under Section 12A or Section 12AA must be provided by the trust, society, or association.
  • For such a grant of registration, they can also have a self-certified copy of the application refusal notice.

Benefits under Section 12A

If the trust or NGO in which the charity is made is licensed under Section 80G, the donor will be eligible for a tax exemption on the money donated. Whenever an individual decided to donate a portion of their money to a trust or non-profit organization, they may be eligible for a tax deduction. Trusts or NGOs that are licensed under Section 12A may be eligible for a variety of benefits under Section 80G registration. By filing for Section 80G, trusts and non-profits increase their value and respect, making it easier for donors to contribute vast sums of money to them. Making a donation to well-known trusts or NGOs gives donors faith in humanity and happiness.

Trusts and NGOs that are licensed under Section 12A and Section 80G have easy access to government funds and grants. To qualify for the tax exemption, the donor should only contribute up to 50% of their total income.