Introduction:
Tax exemption is a crucial aspect of running a Non-Governmental Organisation (NGO) in India. It not only helps NGOs save money but also encourages donors to contribute to their noble causes. In this comprehensive guide, we will explore the certifications needed to obtain tax exemption for your NGO, the procedure to acquire these certificates, and the significant benefits they bring. If you're looking to navigate the tax landscape for your NGO, you've come to the right place.
Certifications Needed for Tax Exemption:
After your NGO registration, to qualify for tax exemption in India, an NGO typically needs two essential certifications:
- 12A Registration: This certificate is provided under Section 12A of the Income Tax Act, 1961. It grants your NGO tax exemption on its income, ensuring that donations and funds received are not subject to tax.
- 80G Certificate: Under Section 80G of the Income Tax Act, 1961, this certificate enables donors to claim deductions on the contributions they make to your NGO. It incentives individuals and organisations to support your cause by offering them tax benefits.
Procedure to Obtain These Certificates:
Obtaining the 12A and 80G certificates involves a specific procedure:
12A Registration:
- Prepare and submit an application in Form 10A to the Commissioner of Income Tax (Exemptions) in your jurisdiction.
- Provide details of your NGO's objectives, sources of income, and financial statements.
- The Income Tax Department will scrutinise your application and may conduct a field inquiry.
- Once approved, you will receive the 12A certificate.
80G Certificate:
- Apply in Form 10G to the Commissioner of Income Tax (Exemptions).
- Attach necessary documents such as audited financial statements, trust deed, and PAN details.
- The department will review your application and may conduct an assessment.
- Upon approval, you will be granted the 80G certificate.
Benefits of Tax Exemption for NGOs:
Obtaining tax exemption certificates offers several advantages to NGOs:
- Increased Funding: Donors are more likely to contribute to tax-exempt NGOs, as their donations are eligible for tax deductions. This can significantly boost your fundraising efforts.
- Financial Sustainability: Tax exemptions on income ensure that a higher portion of your funds can be directed towards your projects and initiatives.
- Enhanced Credibility: Having these certificates enhances your NGO's credibility, as it signifies compliance with legal and financial standards.
- Transparency: NGOs with tax exemption certificates are subject to rigorous financial audits, promoting transparency in their operations.
- Competitive Edge: In the competitive landscape of NGOs, tax exemption can set you apart and attract more supporters.
Key Aspects to Consider:
While pursuing tax exemption for your NGO, keep these key aspects in mind:
- Legal Compliance: Ensure that your NGO complies with all legal and financial requirements to qualify for tax exemption.
- Regular Audits: Be prepared for regular audits by the Income Tax Department to maintain your tax-exempt status.
- Maintain Transparency: Maintain transparent financial records and adhere to the objectives stated in your trust deed or governing document.
Conclusion:
Tax exemption is a valuable tool for NGOs in India, opening doors to increased funding and credibility. The 12A and 80G certificates are essential for achieving this status. If you require expert assistance in obtaining these certificates or navigating the legal aspects of your NGO, Vakilkaro Legal Firm is here to help.
Contact us at +919828123489 or email us at help@vakilkaro.co.in for comprehensive support and guidance. We are committed to assisting your NGO in achieving its noble mission while maximising its tax benefits.