Revalidation of Sections 12A and 80G: A Guide for NGOs
- Farheen Mukadam
- Jul 30
- 8 min read
In India, charitable organisations are entitled to specific tax breaks and advantages. Sections 12A/12AA and 80G address these exemptions and benefits. Institutions using these exemptions and perks are required to revalidate their registrations under these two sections by August 2020 to continue receiving the benefits. The goal of this revalidation process is to determine whether the institution, trust, or NGO's endeavors are sincere.
Table of Contents
What is 12A and 80G Registration?
According to Sections 12A and 80G of the Income Tax Act of 1961, non-profit organisations must properly register to be eligible for tax benefits. They are registered as tax-exempt under Section 12A, and the donors can deduct their income taxes under Section 80G. These registrations facilitate the organisations' ability to successfully carry out their social welfare initiatives and allow them to get government funding and tax breaks. These registrations encourage a culture of donations, increase non-profits' legitimacy, and make financial reporting more transparent.
Understanding Revalidation Of 80G And 12A Registration
It is essential to go through the process of revalidating 80G and 12A registrations if your organisation is an NGO, Trust, or Section 8 Company that benefits from Section 80G and 12A Deductions. You must apply for the revalidation of your current 12A and 80G registrations to continue with the benefits of the 12A Certificate for NGOs and 80G deductions. The Finance Act of 2020 introduced an update necessitating the revalidation of 80G and 12A. A new regulatory structure has been introduced by this amendment for a number of charity organisations. This includes hospitals, universities, medical facilities, trusts, and institutes. Under this Act, all nonprofit organisations that were previously registered under Sections 12A/12AA and/or 80G of the IT Act must reapply to be registered under the revised requirements.
What is Section 12A?
A trust or charity institution's registration under section 12A/12AA attests to the Income Tax authorities' recognition of the entity's incorporation or establishment for a charitable purpose. As a result of this recognition, the corresponding institutions are released from paying income tax, provided that they meet other legal compliance criteria. Section 12AA addresses trusts and institutions registered after 1996, whereas Section 12A addresses trusts and institutions registered prior to 1996. NGOs must get a 12A certification in order to receive tax benefits, regardless of whether they are set up as a trust, society, or non-profit business.
What is Section 80G?
Trusts and charity organisations do not directly benefit from being registered under Section 80G. The purpose of the trusts or charity institutions' Section 80G registration is to allow their contributors to get specific tax benefits on their contributions. Charitable organisations must register under Section 80G to encourage donations from their donors. However, only NGOs that have registered under both Section 12A and Section 80G are eligible for government funding.
Steps for Revalidation Under Section 12A and 80G
The Principal Commissioner of Income Tax or Commissioner of Income Tax must receive an online application in Form 10A from a charity, religious trust, or organisation, including an NGO, to claim exemption. The steps to apply for registration or revalidation are listed below:
Step 1: Go to the IT department's e-filing portal and log in.
Step 2: Navigate to the e-File tab and select "Income Tax Forms."
Step 3: Choose "Form 10A" as the Form Name, then use the drop-down menu to choose the appropriate Assessment Year.
Step 4: During the submission process, choose "Prepare and Submit Online."
Step 5: Complete the form with all the necessary information and include the relevant attachments.
Step 6: As needed for submitting a return, submit the form with a digital signature or an EVC (Electronic Verification Code).
NGO applications for registration or revalidation under the new Section 80G provisions must include their registration number information on the Niti Aayog DARPAN site. Organisations that plan to apply for or receive grants or support from the federal government or state governments must also register under Sections 12A and 80G.
Documents for Revalidation Under Section 12A and 80G
When applying for revalidation, the following paperwork must be included:
A copy of the Society/Trust's incorporation document that has been self-certified
A copy of the registration that has been self-certified by the Registrar of Companies, Registrar of Societies, Registrar of Firms, or Registrar of Public Trusts, as applicable
If the applicant is registered under the Foreign Contribution (Regulation) Act (FCRA) 2010, a self-certified copy of that registration is required.
If relevant, a self-certified copy of the most recent registration order under section 12A/12AA/12AB
Copies of the annual accounts for the three years or less immediately before the year of application, if the entity is already in existence.
If the organization's income comprises business profits and gains or if it owns a business venture under Section 11(4A), copies of the annual accounts and audit report under Section 44AB for the three years before the application year
A self-certified copy of the records attesting to the items' adoption or modification
Observations regarding the institution's or trust's operations
If the organisation is registered on the DARPAN portal, the DARPAN registration details
Issuance of Certificate of Revalidated Registration
Following the filing of the revalidation application on April 1, 2021, an order authorising the revalidated registration is granted within three months. The revalidated registration under section 12A and/or 80G is valid for 5 years, or until the subsequent revalidation. A reapplication must be made at least six months before the registration's validity period expires after five years. The Principal Commissioner of Income Tax (PCIT) or Commissioner of Income Tax (CIT) shall provide a 16-digit Unique Registration Number (URN) to the applicants upon receiving the revalidation application under 10A and will give a written order of approval in Form 10AC.
If necessary, the PCIT or CIT may request additional papers from the applicant or deny the application after providing a hearing. Form 10AC is another document that contains the rejection order. The renewal application must be submitted in Form 10AB by the applicants following the first five years of registration. The PCIT/CIT will receive the application under Form 10AB and then issue an order of registration, cancellation of registration, or rejection in Form 10AD. The PCIT/CIT has the right to request additional documents from the applicant in order to verify the authenticity of the organization's or trust's operations and the adherence to any other laws currently in effect that are necessary for the organization or trust to accomplish its goals.
The following significant modifications have been made to the revalidation process:
Section 12AA/12AB has extended the registration validity period from 5 to 10 years for trusts and charitable institutions whose total income in the previous two years did not exceed Rs. 5 Crore (before exemption).
Applications filed after March 31, 2025, will be subject to this change. A new trust's temporary registration, which is valid for three years, is exempt from this rule.
Small trusts with a valid approval until March 31, 2026, will still be able to apply for renewal by September 30, 2025. However, trusts and institutions will still need to apply for registration renewal under section 80G every five years, and the renewal they receive will be valid for ten years rather than five.
The renewal or registration of trusts and institutions that are subject to the commissioner's cancellation has been amended. Now, it would only be based on inaccurate and misleading information. In the past, the entire application would be rejected if it was incomplete.
Importance of Timely Renewals and Compliance
An NGO's financial stability and transparency depend on both its 12A and 80G registrations. Their continuous validity depends on appropriate renewal procedures and upholding compliance, even though they are not permanent. NGOs need to follow certain guidelines to make sure they keep their registered status:
Filing Annual Returns on Time: All non-governmental organisations, whether they are registered as trusts, societies, or under Section 8 of the Companies Act, are required to submit yearly reports to the appropriate authorities. Providing the Income Tax Department with audited financial statements and activity reports is part of this.
Maintain Documents: NGOs should maintain thorough records of their income, spending, and donations.
Regular audits: Regular audits guarantee that the organization's financial records are correct and in accordance with legal obligations. This is critical to retaining the NGO's tax-exempt status.
Update Information: If the NGO's aims or operations change, it must provide the Income Tax Department with updated information. This is very necessary when applying to renew your 12A or 80G registration.
What Happens on Failure to Renew 12A or 80G?
Failure to renew an NGO's 12A or 80G registration may result in the following consequences:
Loss of Tax Exemption: If the 12A registration is not renewed, the NGO may be subject to income tax on any cash or revenue earned by its operations, potentially reducing available resources for charitable activities.
Ineligibility for Tax-deductible Donations: Donors who do not register under 80G will no longer be able to deduct their contributions from taxes. This could lead to fewer donations, as many contributors prefer to earn tax breaks for their charitable gifts.
Reputational Damage: Donors, stakeholders, and the public may lose trust in the organisation if it fails to comply with tax authorities, which could undermine the NGO's reputation and ability to obtain funds.
Conclusion
12A and 80G registrations are essential for any NGO operating in India, as they provide for tax breaks and encourage donor assistance. These registrations, however, are not permanent and must be renewed regularly to be in accordance with tax regulations. To keep their 12A and 80G benefits, NGOs must file annual reports, update records, and follow all relevant processes. By following these best practices and getting expert advice, NGOs may ensure the continuous validity of their registrations while also maintaining their financial health and credibility in the long run.
Frequently Asked Questions
Is 12A registration mandatory?
To be eligible for exemptions under sections 11 and 12, all NGOs must register under section 12A of the Income Tax Act.
Why is an 80G registration necessary?
NGOs register under the 80G law so that their contributors can claim their donations as a tax deduction. The goal of 80G registration is to promote additional donations from NGOs.
Can an NGO get 80G and 12A registrations simultaneously?
No, only after obtaining the 12A registration, they can apply for the 80G registration.
For what duration is 80G valid?
The validity period is 5 years.
How can I get my 80G and 12A renewed?
Online applications for the process are available on the income tax department's website.
Who can apply for the 80G registration?
Any trust, non-governmental organisation, nonprofit organisation, or section 8 corporation may apply for an 80G registration.
What makes 12A and 80G different?
While 80G Registration, which is covered by Section 80G of the Income Tax Act, benefits an NGO's donor, 12A Registration allows an NGO to keep its organisational revenue tax-free.
How can my 12A certificate be renewed?
You should gather the appropriate papers, such as updated financial records and compliance reports, to renew your 12A accreditation. Submit your renewal application to the proper tax authorities within the timeframe specified.
How much tax is not subject to 80G?
Section 80G allows you to donate 50% of your earnings to charitable organisations or funds.
