Benefits of 12a registration

Section 12a registration has the following advantages:-

(1) The application of the revenue is deemed to have occurred when the money was used for charitable or religious purposes. The term "income application" describes how the taxable revenue of the not-for-profit organisation is determined by taking into account the costs incurred for charity or religious reasons.

(2) No income tax will be applied to the received income.

(3) The person who has registered under Section 12a may make use of benefits for saving or accumulating income. However, the money set aside shouldn't account for more than 15% of the income used for charity or other non-profit activities.

(4) The assessee's aggregate income is not the amount of income that is regarded to constitute the income application.

(5) Both local and foreign sources of funding may be used to support NGOs through grants. Grants may be given by these organisations to NGOs that have registered with them in accordance with this clause.

(6) The registration issued pursuant to section 12a will be regarded as a single registration. When registration is made, it remains valid until the date of cancellation.

(7) Renewing the registration on a regular basis is not necessary. So, if and when the need arises, an NGO may collect the registration advantages.

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The requirements for 12a registration

(1) For an organisation to be eligible for registration under section 12a, it must fit the Income Tax Act's definition of a charitable purpose. Charitable purposes include helping the underprivileged, promoting education, providing medical assistance, and engaging in actions aimed at protecting the environment. Any additional public utility goals may be pursued and yet count as philanthropic purposes.

(2) Examining whether the assessee's activities are motivated by a profit motive is the main qualification requirement. Registration should be permitted in the absence of profit motivation.

(3) The provision provided under this section is restricted if the assessee engages in activities connected to trade or commerce. In these situations, registration is only authorised if the assessee's total receipts are less than 20% of the proceeds from the trading activity.

(4) It should also be mentioned that Private or Family Trusts are not covered by the 12a registration. The assessed party's actions must actually benefit the general public.

More facts on 12a can be fetched from here.