Non-profit organizations in India often seek registrations under sections 12A and 80G of the Income Tax Act, which provide tax benefits both to the non-profit entity and its donors. However, there is some confusion around whether these registrations can be obtained without first registering the organization as a trust, society, or a non-profit company. This article explores the prerequisites for 12A and 80G registrations and whether they can be pursued without a formal trust registration.
Understanding 12A and 80G Registrations
Section 12A: Registration under section 12A allows a non-profit entity to be exempt from paying income tax on their surplus income. This is crucial for non-profits as it maximizes the amount of funds available for their charitable activities.
Section 80G: Registration under section 80G allows donors to claim a tax deduction on their donations to the non-profit. This serves as an incentive for more people to donate, as it reduces their taxable income.
Requirement of Trust/Society/Non-Profit Company Registration
Before delving into whether 12A and 80G registration can be secured without trust registration, it’s important to understand what constitutes a trust, society, or non-profit company:
- Trust: A trust is formed by transferring property to a trustee, who manages it for the benefit of one or more beneficiaries, according to the terms specified by the settlor (the person who creates the trust).
- Society: A society is an association of several individuals combined using a mutual accord to deliberate, govern, and act cooperatively for some communal purpose.
- Non-profit Company: Under Section 8 of the Companies Act, 2013, a non-profit company can be established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment, or any such other object.
Is Trust Registration Mandatory for 12A and 80G?
To apply for 12A and 80G registrations, an entity must be recognized legally as a non-profit organization. This means the entity must be registered under one of the following:
- Trusts registration Act, 1882 (for trusts),
- The Societies Registration Act, 1860 (for societies), or
- Section 8 of the Companies Act, 2013 (for non-profit companies).
Without one of these registrations, an organization cannot legally qualify for 12A and 80G registrations because there is no formal recognition of the entity’s non-profit status. Essentially, registration as a trust, society, or non-profit company establishes the legal personality of the entity, which is a prerequisite for tax exemption and donor benefit claims under the Income Tax Act.
FAQs: 12A and 80G Registrations for Trusts and Non-Profit Organizations
1. What are 12A and 80G registrations?
- 12A registration allows non-profit organizations to be exempt from paying income tax on their surplus income. 80G registration enables donors to claim a tax deduction for donations made to the registered non-profit, reducing their taxable income.
2. Is it mandatory to have a trust or society registration to apply for 12A and 80G?
- Yes, an organization must be registered as a trust, society, or a Section 8 company under the Companies Act, 2013 to qualify for 12A and 80G registrations.
3. Can a new non-profit immediately apply for 12A and 80G registrations?
- Yes, a newly registered non-profit can apply for these registrations. However, the process will involve scrutiny of the organization’s objectives, activities, and governance to ensure compliance with the Income Tax Act.
4. What documents are required for 12A and 80G registrations?
- Required documents typically include the trust deed or registration certificate, PAN card of the organization, books of accounts, income tax returns if applicable, and a list of trustees or governing body members.
5. How long do 12A and 80G registrations take?
- The processing time can vary, but it typically takes several months. The exact timeline can depend on the completeness of the application and the responsiveness of the tax department.
Conclusion
In conclusion, it is not possible to obtain 12A and 80G registrations without first registering the entity as a trust, society, or a non-profit company under the respective Indian laws. Such registration not only formalizes the entity’s existence but also forms the legal basis for pursuing tax-related benefits under the Income Tax Act. Non-profits seeking these benefits should first ensure they are compliant with the initial registration requirements before applying for 12A and 80G.
Also read :How Can You Make the Most of Your Adventure?