12a and 80g
Difference Between 12a and 80g
December 23, 20254 views
Quick Summary
If you are running a non-profit organisation, registering your trust, society, or section 8 under Section 12A and 80G of the Income Tax Act can be beneficial.
Confused about whether 12a and 80g registration are similar or not? You must understand the core difference between these two. The key difference between 12A and 80G registration is that 12A provides income tax exemption to the non-profit organisation itself, while 80G offers tax deductions to donors who contribute to it.
In simple terms, registration under Section 12A saves tax for the organisation, and registration under Section 80G encourages more donations by offering tax benefits to donors. Understanding the difference between 12A and 80G is important for both non-profits and their contributors.
What is Section 12A?
All non-profit organisations involved in meaningful charitable activities often receive a significant amount of funding from multiple sources. To utilise this funding properly without the risk of tax deductions, these organisations can apply for 12A registration. This helps them save on taxes and continue their good work. However, 12A registration is a prerequisite for 80G registration.
Who can apply for it?
- Groups that primarily focus on religious activities and charitable work.
- Non-profit schools, colleges, and educational foundations.
- Section 8 Companies that are incorporated under the Companies Act, 2013, for promoting social welfare, arts, or research without profit distribution.
Benefits of 12A
- Tax Exemption: After obtaining this registration, your NGO does not need to pay income tax on its earnings.
- Grants from Various Sources: A registered trust or society can receive funds from the government, private, and international organisations. This improves their credibility and financial support.
- Proof of Existence: The 12A certificate serves as legal proof that the organisation exists. It also helps in securing grants or loans from the government.
- Wider Recognition: NGOs and societies with a 12A certificate gain more recognition for their charitable activities, which makes it easier to get wider recognition
What is 80G?
Once registered, an NGO is entitled to avail several tax benefits, but donors are not. To encourage donations, the Income Tax Act provides tax benefits to donors under Section 80G. This section allows donors to claim deductions on their taxable income for donations made to eligible organisations. However, the primary goal of 80G is to support organizations involved in social or cultural development activities.
Who can apply for it?
- An NGO that is not working for the benefit of a particular religious community or caste.
- Non-governmental organization that maintains regular accounts of its receipts & expenditures.
- The NGO is properly registered under the Societies Registration Act 1860 or under any law corresponding to that act, or is registered under section 8 of the Companies Act 2013.
Benefits of 80G
- Tax Benefits for Donors: If a trust or organisation has an 80G certificate, donors can claim tax deductions on their taxable income for the donations they make.
- Improved Credibility: Having an 80G certificate increases an organisation’s credibility and goodwill, attracting more donors who trust the NGO’s work.
- More Donors: Since 80G offers tax benefits, it encourages more people and businesses to donate, knowing they can claim deductions on their taxable income.
- Transparency and Accountability: To maintain 80G registration, organisations must follow transparency and reporting standards. This builds donor trust and ensures accountability.
- Easier Access to Government Funds: NGOs with an 80G certificate are more likely to receive government grants and funding, as it proves their credibility and eligibility.
- Stronger Reputation: With government support and increased donations, an NGO gains a better reputation among the public, making it easier to attract more support.
Key Difference Between 12A and 80G
The distinctive difference between 12A and 80G lies in who benefits from the tax exemption.
With 12A registration, your nonprofit organisation enjoys the benefit of tax exemption on the funds received for charitable purposes. This means more money stays within your organisation to further your mission.
On the other hand, with 80G registration, your donors can claim tax deductions ranging from 50% to 100% of your donation amount. This incentivises people to donate more generously to your cause.
Here's a simple example: If your NGO receives Rs. 10 lakhs in donations, 12A ensures your organisation doesn't pay tax on this income. Meanwhile, 80G allows your donors to reduce their taxable income based on their contribution.
| Aspect | Section 12A | Section 80G |
| Primary Beneficiary | The charitable organisation itself | Donors contributing to the organisation |
| Tax Benefit | Income tax exemption on charitable income | Tax deduction for donors on donations made |
| Deduction Limit | Complete exemption on qualifying income | 50% or 100% deduction depending on approval type |
| Validity Period | Generally, 5 years, then renewal is required | Generally, 5 years, then renewal is required |
| Mandatory Requirement | Essential for NGO/trust tax exemption | Optional, but highly recommended |
| Application Form | Form 10A | Form 10A |
| Financial Requirement | Must maintain proper books of accounts | Must maintain donation receipts and records |
| Cancellation Risk | If activities become non-charitable | If funds are misused or objectives changed |
Why Your Organisation Needs Both
While the difference between 12A and 80G is clear, most successful nonprofits obtain both registrations. Here's why:
- Having both 12A and 80G registration ensures your organisation operates tax-efficiently, preventing you from losing a portion to taxes.
- Adding these registrations also makes your organisation attractive to donors. When people know they'll get tax benefits, they're more likely to donate and often contribute larger amounts.
Quick Tips for Success
For 12A Registration:
- Ensure your trust deed or MOA clearly defines charitable objectives
- Maintain detailed records of all activities from day one
For 80G Registration:
- Document all charitable activities with photos, beneficiary lists, and impact reports
- Show transparent fund utilisation in your financial statements
Conclusion
Whether you're starting a new NGO or running an established charitable organisation, understanding and utilising both 12A and 80G registrations will significantly enhance your ability to create lasting social impact. To avoid losing your 12a and 80g status, hire a qualified chartered accountant or an online legal consultancy like NGOExperts, familiar with NGO compliances.
Remember, these registrations aren't just about tax savings; they're stamps of credibility that can transform your nonprofit's growth trajectory.
Frequently Asked Questions (FAQs)
Q1: Can I get 80G without having 12A registration?
While technically possible in some cases, it's highly recommended to obtain 12A first. Having 12A demonstrates your organisation's credibility and compliance.
Q2: How long does it take to get 12A and 80G registrations?
The processing time varies but typically takes 2-4 months for 12A and 3-6 months for 80G after submission.
Q3: What is the difference between 12A and 80G in terms of cost?
There are no government fees for applying for 12A or 80G registrations. However, you'll incur costs for document preparation, auditing, and professional fees if you hire a CA or consultant.
Q4: Can my 12A or 80G registration be cancelled?
Yes, both registrations can be cancelled if your organisation violates conditions like using funds for non-charitable purposes, not filing annual returns, or operating for profit.
Q5: Do I need to renew 12A and 80G every year?
No, these registrations are valid for 5 years from the date of approval.