Wednesday 20 March 2013

What 12A and 80G Means to a Non-Profit

What is the need to apply for 12A and 80G?
 
Many start-up NGO’s ask this question, that is, out of those who are aware that such a  certification process exists.
 
Indeed, 12A and 80G are crucial processes for any NGO that needs to generate income for its charity-based operations. The ability to offer a donor a return benefit for their contribution is a major advantage in the world of fundraising. And this is where 12A and 80G are essential, as they enable the gift of tax exemption It is best to apply for 12A and 80G as soon as the NGo is registered. Prepare for a high level of scrutiny from the government, especially with regards to the Memorandum of Association. Scrutinization is undertaken as an attempt to sift out NGOs with less genuine intentions to create positive social change. One recent example involved the perusal of records that led centre and state governments into an investigation of one rights-based organization, resulting in the accusation that 46.8 lakh of huge, unaccounted grants were being distributed to NGOs, including blacklisted ones, often against a bribe. 
To apply for 12A registration, the 10A form needs to be filled (You can download the 10A form here to get 12A certification which is editable). Once 12A is approved, it is valid for a lifetime.
 
The NGO is then ready to apply for the 80G. The form to the filled in is 10G (You can Download the form 10G to get 80G). Once 80G is approved it is valid for a period of 1 to 3 years.
 
There are few conditions to be fulfilled under the section 80G:
  • The NGO should not have any income which is not exempted, such as business income. lf the NGO has business income then it should maintain separate books of accounts and should not divert donations received for the purpose of such business.
  • The bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes other than charitable.
  • The NGO is not working for the benefit of particular religious community or caste.
  • The NGO maintains regular accounts of its receipts & expenditures.
  • The NGO is properly registered under the Societies Registration Act 1860 or under any law corresponding to that act or is registered under section 25 of the Companies Act 1956.
Documents required for registration of u/s 12A and 80G:
  1. Dully filled in Form - 10A for registration u/s 12A registration;
  2. Dully filled in Form - 10G for registration u/s 80G registration;
  3. Registration Certificate and MOA /Trust Deed (two copies - self attested by NGO head);
  4. NOC from Landlord (where registered office is situated);
  5. Copy of PAN card of NGO;
  6. Electricity Bill / House tax Receipt /Water Bill (photocopy);
  7. Evidence of welfare activities carried out & Progress Report since inception or last 3 years;
  8. Books of Accounts, Balance Sheet & ITR (if any), since inception or last 3years;
  9. List of donors along with their address and PAN;
  10. List of governing body I board of trustees members with their contact details;
  11. Original RC and MOA /Trust Deed for verification;
  12. Authority letter in favour of NGO
  13. Any other document I affidavit / undertaking I information asked by the Income Tax department
When called for hearing, the representative needs to carry all the originals of the documents submitted at the time of application.
Income tax department has the power to approve or reject such approval upon disqualification of the non-profit organization or dissatisfaction found by the department towards the non-profit NGO organization activities
 

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