The Income Tax Act, which was enacted in 1961, is the statute that governs everything relating to taxation. This comprises income tax levy, collection, administration, and recovery. The act's primary goal is to consolidate and alter the country's taxes rules.
The Income Tax Act is divided into several sections, each of which deals with a particular component of the country's taxation. Every year in February, the Indian government releases its fiscal budget. The budget proposes a number of changes to the Income Tax Act.
Section 80G of the Income Tax Act
Giving to charity is a good endeavor, donating your earnings to charitable organizations brings you more benefits than just good karma. Under the Income Tax Act of 1961, contributions to selected charitable organizations mentioned in Section 80G of the Income Tax Act are eligible for tax deduction. The Income Tax Act's Section 80G registration largely deals with charitable donations, whilst Section 80G registration deals with the limitations on tax exemption on gifts made under Section 80G.
NGOs can benefit from registration under section 80G of the Income Tax Act. If the NGO possesses an 80G certificate, the donor receives a financial benefit in his or her taxable income. If an NGO is registered under section 80G, a person or organization making a donation to the NGO will be eligible to deduct 50% of his or her taxable income. NGO can attract more contributors by obtaining an 80G Certificate.
If an NGO is registered under section 80G, a person or organization who makes a donation to the NGO will be allowed to deduct 50% of his or her taxable income.
Section 12AA of the Income Tax Act
The purpose of registering for 12AA is to receive an income tax exemption. Once this registration is completed, the organization's entire income is exempt from taxation. Form 10A is used to complete the 12AA registration application. The Commissioner of the Income Tax Department, who has jurisdiction over the institution, will process your application for registration under section 12AA. All NGOs are eligible for income tax exemption, but only those that are aware of it and can take advantage of it are eligible. As a result, all NGOs, Trusts, and other Not-for-Profit organizations must be aware of Section 12AA of the Income Tax Act in order to enjoy the benefit of the exemption limit.
Section 12AB of the Income Tax Act
Previously, an NGO's registration to have its income exempted from tax was done under Section 12AA. After Section 12A Registration, all income is exempt from taxation. If a non-profit organization does not obtain 12A registration, income tax is due on any surplus throughout the year.
According to the revised compliance with regard to sections 12A and 12AA of the IT Act, all NGOs that now hold exemption u/s 12AA of the IT Act must reapply by March 31, 2022. (As extended) and will be required to apply for a new registration under Section 12AB.