Our nation has become ruthless; it requires compassion, benevolence and charitable deed for its well-being. One such Establishment that emphasizes on the advancement of Religion, Art, Literature, Science, Education, Sports...
NGO is a Non-Governmental Organization wherein a voluntary group of people with a common interest performs a variety of humanitarian deeds. The central aim of an NGO is to seek help of the Government and resolve public issues with its association. There are various types of NGO’s, namely Section 8 Company, Trusts and Society that works for the welfare of our nation. Such organizations can avail various rewards like Income Tax exemption by registering under Section 12AA. This write-up will provide complete knowledge about Documents Required for 12AA Registration, eligibility, advantages, procedure etc.
What is 12AA Registration?
As per Section 12AA of Income Tax Act, 1961, any Registered NGO is exempted from paying Income Tax on the surplus income, which is known as 12AA Registration.
It is the preliminary step that an NGO needs to take after its Incorporation to relish benefits from Income Tax department. Once registered, the NGO gets a 12AA Certificate that helps it to accumulate funds from the Government and international sources. Moreover, 12AA Certificate also serves as a legal proof of NGO’s existence.
Benefits of registering under Section 12AA
Before you start preparing 12AA Registration documents, take a look at the advantages that it can avaol:
Application of income: The income deployed for charitable or religious purposes are considered as an application of income. It refers to the expenditure incurred by a Registered NGO for religious or charitable purposes which results in the reduction of taxation burden.
- Storing income to foster charity: A 12AA Registered NGO gets the benefit of keeping or accumulating 15% income for the religious or charitable purposes.
- One time Registration: 12AA Registration is a one-time procedure. Once you are done with 12 AA Registration, it shall remain active until the date of cancellation. Thus, there is no requirement for Registration renewal.
- Grants from the government, abroad & other agencies: Government along with many domestic and international agencies grant funds to 12AA Registered NGO. Only the Registered NGO is eligible to take leverage of financial funding from third-party entities.
Documents required for 12AA Registration
Income Tax Rules, 1962 has prescribed the list of documents that any NGO, Section 8 Company or Trust which intends to register under Section 12AA must submit to Income Tax Department.
- Form 10A which is an Application for Registration of a Religious Trust or Charitable Institution shall be furnished electronically under Digital Signature Certificate (DSC) to the Commissioner of Income Tax along with the documents mentioned below:
- Two signed and stamped copies of RC and MOA or Trust Deed
- No Objection Certificate from the landlord of the premises
- A copy of PAN Card
- Copies of financial records like Audited Accounts of NGO of last 3 years or its inception, whichever is less
- Details of the activities performed by the NGO since its inception or last 3 years, whichever is less
- The applicant may also need to submit the copies of Accounts of the last few years
- Provide a photocopy of House Tax Receipt, Electricity Bill or Water Bill
- A proof of welfare activities and Progress Report of NGO since its inception
- Books of Accounts and ITR, (if any from the time of inception)
- Original documents of the NGO such as Trust Deed, Rules and Regulations, Bye-laws etc
- Memorandum of Association and Articles of Association
Eligibility for 12AA Registration
In order to register under Section 12AA, an organization has to meet the conditions mentioned below:
- The NGO has to pursue all the charitable activities which are defined in Income Tax Act. The term charitable implies to the welfare of poor, enhancing education, medical development and other activities to preserve the environment.
- The primary criteria to reject or accept NGO Application is by checking whether the organization has any personal profit generating motive or not. 12AA Registration Certificate shall only be granted to the NGO which has no profit motive.
- If the assessee carries out any activities of trade or commerce, then the facility of Income Tax exemption shall not be provided. In such a case, the Registration will only be granted if the receipts from the trade activities are less than 20% of the total receipts of the assessee.
- 12AA Registration under Income Tax Act, 1961 is not applicable for Family or Private Trusts. Thus, the assessee has to be the benefactor of the public.
Step by Step Procedure of 12AA Registration
After you draft and prepare all the necessary 12AA Registration documents, undertake the simple steps mentioned below:
Step 1: Filing Application in Form 10A
The foremost step for 12AA Registration as per the Rule 17A of the Income Tax Act, 1961, is to file Form 10A with the Jurisdictional Commissioner of Income Tax Department. Also, submit all the documents mentioned above with your Application.
Step 2: Assessment of the documents
Now, the Commissioner of IT department will scrutinize your 12AA Registration documents and the Application. He will check the authenticity of the provided information. He may also demand for additional documents if he feels some information to be incomplete.
Step 3: Issuance of 12AA Registration Certificate
Once the Commissioner finally becomes satisfied, he will issue Certificate of 12AA Registration. However, in case your documents are incomplete or contain false information, then the Commissioner can reject your Application.
For legal assistance in 12AA Registration documents preparation, consult Swarit Advisors. We have an experienced team of Lawyers who have assisted more than 5000 NGO’s till date. Our team is involved in end to end follow up with Income Tax Department and help you track the progress of your Application in the real-time.
Also, Read: An overview of National Society Registration.