When you have a source of income and it exceeds a specific amount, then you have to pay income tax on it to the government. But under Income Tax there is section 12A which allows NGOs (Non-Government Organizations), Trust and Section 8 companies to get exempted from paying income tax on their surplus income. Therefore all the non-profit entities must take a one-time registration of 12A. Once they are established they can register for 12A.
- Generally, the entities who are registered under 12A avail the benefit of various government grants.
- Having a 12A certificate also enables us to get 80G certification as it is a prerequisite to apply for it.
- For taking FCRA registration, 12A is mandatory.
- The application of funds for charitable or religious purposes is considered as the application of the income. The income application refers to the expenses for calculating the income tax of non-profit entities.
- The income received (like donation or contribution) will be free from the charge of income tax.
- The entities who are registered can avail a benefit for accumulating or setting aside of their income. But it should not be greater than 15% of the amount applied for charitable, religious or other non-commercial purposes.
- It is a one-time registration and it lasts till the date of cancellation.
Terms to be followed:
Only taking the registration itself does not help them to get tax exemption the also have to follow certain terms and guidelines to get the benefits from it the following terms are:
- These entities must maintain the books of accounts and record all receipts otherwise they are not eligible to avail the tax exemption.
- They must spend more than 85% of their income on charitable purposes or for welfare in order to get the tax benefit.
- If they are working for a specific cast or community they are not allowed to take benefit so they have to strictly follow this term.
- If an entity has some other business and they have income from it then they are not eligible.
- They have to get registered under both 12A and 80G to take tax exemption.
- Copy of Registration certificate which is received after registration of the entity.
- A self-certified copy of the documents is required which is used as evidence for any adoption or modification in the objective of the entity.
- Copy of Permanent Account Number (PAN).
- Copy of Trust Deed/ Society Deed.
- Copy of Memorandum of Association (MoA) and Articles of Association (AoA).
- Last 3 years Financial statements copy.
- List of Objectives of the entity.
- FCRA Registration copy if any.
- Copy of rejection order of 12A previously.
Steps for registration:
Step 1: Go to the website of income tax efiling link(incometaxindiaefiling.gov.in/home) and login thereby entering your organizations credentials( ID, Password and Captcha code).
Step 2: Now after login to the website now go on the e-file tab and select the Income Tax forms option from there.
Steps 3: Select Form no. 10A from the form type name section, and prepare and submit online from the submission mode section.
Step 4: Now by default, it is CIT(exemption) your registered city if you have different jurisdiction please select accordingly.
Step 5: Form 10A now appears on the window, you have to fill all the general information, Trustee/ Board members details.
Step 6: Specify the objective of the organization by ticking from the given list which suits your business objective.
Step 7: Fill the FCRA details if any and fill the details of the signing authority( name, address, phone, email, etc.).
Step 8: After completing the form now you can download a PDF format for preview and check the correctness of details you entered.
Step 10: Upload all the documents scan copy which is mentioned earlier and click on the submit button.
Step 11: After uploading the form now you have to do the E-verification of form from the given options.
Step 12: All the steps are now completed after E-verification is done. You now get an Acknowledgement number, please note down it for future reference.
Now Assessing officer will review your application and documents you serve to them and within 15-30 days if there is any query regarding the documents he will ask for them. And when the assessing officer does not find any error then, the certificate will be issued.