12A, 80G Certifications for Tax Exemptions

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12A, 80G Certifications for Tax Exemptions

In India, 12A and 80G are certifications granted by the Income Tax Department to non-profit organizations, which enable them to offer tax exemptions to donors and enjoy certain tax benefits themselves. Here's a breakdown of both certifications

1. Section 12A Certification

PurposeThis certification is granted to charitable organizations to exempt them from paying income tax on the donations or grants they receive.

EligibilityNon-profit organizations (such as trusts, societies, or Section 8 companies) that are formed with the primary objective of charitable or religious purposes.

Benefits

  • Tax Exemption: Organizations with a 12A certification are not taxed on the income they generate, provided the income is used for their charitable purposes.
  • Credibility: It provides the organization with credibility and encourages more donations and funding.

How to ApplyTo get this certificate, the organization needs to apply to the Income Tax Department with the required documents, including the organization’s registration certificate, objectives, and financial statements.

ValidityThe 12A registration is granted once and remains valid as long as the organization continues its charitable activities. However, the department may audit or revoke the registration if the organization fails to comply with the tax laws.

2. Section 80G Certification

PurposeThis certificate allows donors to claim a deduction for donations made to a certified charitable organization from their taxable income.

EligibilityNon-profit organizations registered under Section 12A can apply for 80G certification. However, not all organizations with 12A status are automatically eligible for 80G status. They must apply separately for it.

Benefits

  • Tax Deduction for Donors: Donors can claim a deduction of up to 50% or 100% (depending on the nature of the organization) of their donation amount from their taxable income.
  • Encouragement for Donations: It encourages individuals and corporations to donate more to the organization, as they can benefit from tax deductions.

How to ApplyAn application has to be submitted to the Income Tax Department with details such as the objectives, activities, and financial records of the organization.

Types of 80G Deductions

  • 100% Deduction: If donations are made to government bodies or some specified organizations, donors can claim 100% deductions.
  • 50% Deduction: Donations to other certified organizations may allow donors to claim 50% deductions.

ValidityThe 80G certificate is usually granted for a specific period (e.g., 5 years), after which it needs to be renewed.

Key Differences Between 12A and 80G

  • Section 12A: Grants tax exemption to the organization, ensuring they are not taxed on income earned for charitable purposes.
  • Section 80G: Provides tax deductions to donors, motivating them to contribute to the organization.