An NGO gets the benefits of exemption under income tax act, for availing such exemption it needs to get registered under 12A and 80G of Income Tax Act. Any donor i.e. Individual, company, firm or any other person making donation to NGO registered under 80G, get deduction about 50% from their taxable income and some qualify at the rate of 100%. Registration under section 12A is one time and has lifetime validity. A newly registered NGO can also apply for such registration. Applications for registration under 12A and 80G can be applied together or it can also be applied separately also.
Eligibility for 80G exemptions
Only donations made to charities prescribed under category 80G are eligible for an 80G deduction. Charities with a religious or business angle are not typically granted 80G certification. Also, gifts made to trusts operating outside India (a foreign trust) are not eligible for tax deduction.
Similarly, if you are donating for a private trust, which is not registered under 80G certification or have given any funding for a political party, you cannot avail of tax exemption for the amount donated. It will be computed as your taxable income.
Tax Benefits to the Organisation
The 80 G certification not only provides the donors with a tax exemption on the amount donated (depending upon the annual income of the donor), but also gives tax benefits to the non-profitable organisation. The institution can get an exemption of 10% for the gross income earned through donations and contributions.
The Income Tax Department has the power to approve or reject such approval upon disqualification of the non-profit organisation or dissatisfaction found by the department towards the NGO’s activities. The primary role of 80G certification is to encourage donors to donate funds to the non-profit organisation. With the certification, donors can save reduce their tax liability by up to 10% for 50% of the amount donated.
Our team of highly qualified professionals at Ask4compliance.com can help you to obtain a registration under 12A & 80G of Income Tax Act to avail host of benefits.