For any NGO, trust, or Section 8 company in India, obtaining 12A and 80G registration is essential to build credibility, attract donors, and operate effectively without financial burden. These two certifications issued by the Income Tax Department provide significant tax benefits both to the organization and to the individuals or companies who donate. Understanding the purpose, use, and importance of 12A and 80G helps NGOs plan long-term sustainability and improve fundraising capabilities.
This article explains what 12A and 80G are, their uses, benefits, and why every non-profit organization should consider obtaining them.
What Is 12A Registration?
12A registration is a tax exemption certificate provided to NGOs, trusts, and Section 8 companies. Once an organization gets 12A approval, it becomes eligible for complete income tax exemption, meaning the income generated or received—from donations, grants, or activities—will not be subject to tax.
Without 12A registration, an NGO will be taxed like a business entity, which can significantly reduce its available funds for social activities.
What Is 80G Registration?
80G registration is a certification that provides tax deduction benefits to donors. When an NGO has 80G approval, anyone who donates to that NGO—whether an individual or a company—can claim a deduction of up to 50% or 100% on the amount donated, depending on the category.
This makes the NGO more trustworthy in the eyes of donors since their contribution provides tax benefits under Section 80G of the Income Tax Act.
What Is the Use of 12A and 80G?
Both certifications serve different but equally important purposes. Here is a detailed look at their uses:
1. Helps NGOs Save Tax and Expand Social Work
The primary use of 12A registration is that it makes the NGO income-tax-exempt. All funds received—donations, grants, or contributions—remain fully available for welfare activities.
How it helps:
- The NGO does not have to pay tax on its income.
- More funds stay within the organization for public welfare.
- Long-term financial stability becomes easier.
This is especially useful for smaller or newly formed NGOs that have limited funds and need maximum resources for operations.
2. Encourages More Donations Through Tax Benefits (80G)
The main use of 80G registration is to motivate individuals and companies to donate.
Why it matters:
- Donors get tax deductions on their contributions.
- Companies fulfilling CSR obligations prefer NGOs with 80G approval.
- It improves the NGO’s credibility and public trust.
When donors know that their contribution is eligible for tax benefits, they are more likely to support the organization regularly.
3. Builds Donor Trust and Transparency
Organizations with 12A and 80G certifications are seen as more credible and accountable. These registrations indicate that the NGO follows proper financial records, governance standards, and compliance processes.
Benefits:
- Increases public confidence.
- Helps in gaining long-term and large-scale funding.
- Improves chances of receiving grants from government and CSR bodies.
Many funding agencies clearly mention 12A and 80G approval as mandatory criteria.
4. Helps NGOs Become Eligible for CSR Funding
Under the Companies Act, CSR (Corporate Social Responsibility) contributions are given only to compliant and verified NGOs.
Advantage for the NGO:
- Most companies prefer NGOs with both 12A and 80G.
- It enhances eligibility for CSR partnerships.
- NGOs can approach corporates confidently for funding proposals.
CSR funding has become a major income source for NGOs, and these certificates unlock more opportunities.
5. Improves Long-Term Sustainability
Both 12A and 80G registrations support the NGO’s long-term financial planning.
How they help:
- Tax savings under 12A improve liquidity.
- Donor trust under 80G ensures regular inflow of funds.
- Better eligibility for national and international grants.
With these approvals, NGOs can focus on social impact rather than worrying about tax burdens or lack of funding.
6. Required for Government Grants and Registration Renewals
Many government schemes and ministries provide financial help to NGOs. However, they often require both 12A and 80G as a part of their eligibility criteria.
Usefulness:
- Mandatory for various government-funded projects.
- Helps in NITI Aayog Darpan registration.
- Aids in building a strong compliance profile during audits.
Thus, these certifications are not just beneficial—they are essential for growth.
Difference Between 12A and 80G at a Glance
| Feature | 12A Registration | 80G Registration |
|---|---|---|
| Purpose | Tax exemption for NGO | Tax deduction for donors |
| Benefit to | NGO itself | Individuals or companies donating |
| Mandatory? | Required for tax exemption | Required to attract donors |
| Validity | 5 years (renewable) | 5 years (renewable) |
Conclusion
The use of 12A and 80G extends far beyond tax savings—they are powerful tools that help NGOs operate smoothly, raise funds effectively, and build long-term credibility. While 12A ensures the NGO does not lose money to taxes, 80G encourages more donations by offering tax benefits to contributors. Together, they create a strong financial foundation that enables NGOs, trusts, and Section 8 companies to focus on their core mission: creating social change.
If you run or plan to start an NGO, obtaining 12A and 80G certification is one of the most important steps to ensure stability, transparency, and successful fundraising.
