Registering your non-profit organization (NGO) under sections 12A and 80G of the Income Tax Act can be a beneficial step, as it allows your donors to claim tax exemptions on their donations and exempts your organization from paying income tax. However, the registration process can be challenging, with several hurdles to overcome. In this article, we will discuss the common challenges faced during 12A and 80G registration in simple language.
Understanding 12A and 80G Registration
Before we dive into the challenges, let’s understand what 12A and 80G registration entail:
- 12A Registration: It is the registration that exempts your NGO from paying income tax on the surplus income generated from your charitable activities. It also makes your donors eligible for tax deductions on their donations.
- 80G Registration: This registration allows your donors to claim tax deductions on the donations made to your NGO. It gives them an incentive to donate to your cause.
Complex Documentation
One of the main challenges faced during 12A and 80G registration is the complex documentation required. This includes the Memorandum of Association, Articles of Association, audited accounts, and details of activities conducted by the NGO.
How to Overcome the Challenge
- Seek professional help: Engage with professionals who have experience in 12A and 80G registrations to guide you through the process.
- Understand the requirements: Take the time to understand the legal requirements for registration and ensure that your NGO meets them.
- Organize documentation: Keep all necessary documents organized and up-to-date to expedite the registration process.
Understanding Legal Requirements
Another challenge is understanding the legal requirements for 12A and 80G registration, which can be difficult, especially for those who are not familiar with legal terminology. It is important to seek guidance from experts to ensure compliance.
How to Overcome the Challenge
- Seek legal advice: Consult with legal experts who specialize in non-profit law to help you understand and comply with the legal requirements.
- Attend workshops or seminars: Participate in workshops or seminars conducted by tax authorities or legal experts to gain a better understanding of the legal requirements.
Proving Charitable Activities
To qualify for 12A and 80G registration, your NGO must prove that it is engaged in genuine charitable activities. This can be challenging, as the definition of charitable activities is broad and subject to interpretation.
How to Overcome the Challenge
- Maintain detailed records: Keep detailed records of all your charitable activities, including receipts, invoices, and other relevant documents, to prove the genuineness of your activities.
- Provide evidence: Provide evidence such as photographs, videos, and testimonials from beneficiaries to support your claims of charitable activities.
Delays in Approval
The approval process for 12A and 80G registration can be time-consuming, with delays often encountered due to the large number of applications received by the tax authorities.
How to Overcome the Challenge
- Follow up regularly: Keep in touch with the tax authorities and follow up regularly on the status of your application.
- Be patient: Understand that the approval process may take time and be patient while awaiting a response from the authorities.
Maintaining Compliance
Once registered, NGOs must comply with various regulations to maintain their 12A and 80G status. This includes filing annual returns and maintaining proper accounts, which can be challenging for smaller NGOs with limited resources.
How to Overcome the Challenge
- Hire a professional accountant: Employ a professional accountant or auditor to help you maintain proper accounts and file annual returns.
- Stay informed: Stay updated with the latest regulations and compliance requirements to ensure that your NGO remains compliant.
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Conclusion
While 12A and 80G registration can be challenging, overcoming these hurdles is crucial to avail the benefits these registrations offer. By understanding the requirements, seeking professional help, and staying organized, your NGO can successfully register under these sections and continue its charitable activities.
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