Running a charitable trust or an NGO in India involves more than just doing good work it also includes fulfilling legal obligations. One of the key registrations you must obtain is under 12AA of Income Tax Act. This registration allows your organisation to claim tax exemption on its income, giving you more financial room to focus on your mission.
But how exactly do you go about applying for 12AA registration? Is the process complicated? And how can tools like Margbooks or other online accounting software make it easier? Let’s break it all down in this detailed blog post.
What is 12AA of Income Tax Act?
Before we get into the application process, it’s important to understand what Section 12AA is all about.
Section 12AA of the Income Tax Act, 1961, provides tax exemption to charitable trusts, societies, and non-profit organizations. If your organisation is registered under this section, the income you generate (donations, grants, etc.) will not be subject to income tax, provided the money is used for charitable purposes.
This provision is crucial because it helps charitable institutions use their resources more effectively without losing a chunk of it to taxes.
Who Can Apply for 12AA Registration?
The following types of organisations are eligible to apply:
- Charitable Trusts (both public and private)
- Societies registered under Societies Registration Act
- Non-profit companies registered under Section 8 of the Companies Act
- NGOs engaged in activities such as education, medical relief, poverty relief, etc.
Benefits of 12AA Registration
Here’s why applying for registration under 12AA of Income Tax Act is a smart move:
- Tax Exemption: Your income is not taxable if used for the stated charitable purpose.
- Increased Credibility: It builds trust among donors and funding agencies.
- Eligible for 80G Registration: After 12AA, your NGO can apply for 80G, allowing donors to claim tax deductions.
- Government Tenders & Grants: Most government departments prefer working with registered NGOs.
Step-by-Step Guide to Apply for 12AA Registration
Let’s walk through the steps involved in applying for registration under this section.
Step 1: Register on the Income Tax E-filing Portal
- Visit https://www.incometax.gov.in
- Create an account if you don’t have one
- Log in using your credentials
Step 2: Fill Form 10A (for New Registration)
- Go to “e-File” > “Income Tax Forms” > “File Income Tax Forms.”
- Select Form 10A, which is meant for applying for 12AA
- Fill in the required details of your trust/NGO, including PAN, address, nature of activities, etc.
Step 3: Upload Required Documents
You’ll need to attach the following:
- Trust Deed or Memorandum of Association (MOA)
- Registration Certificate from appropriate authority
- PAN card of the organisation
- Address proof
- Financial statements of the last three years (if applicable)
- Details of trustees or board members
Step 4: Submit and Verify
- Once all details are entered and documents uploaded, submit the form
- Verify using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code)
Step 5: Follow-up by Tax Department
- The Income Tax Department may ask for additional documents or clarifications
- After reviewing everything, the Commissioner of Income Tax will either approve or reject the application
If approved, you’ll receive a formal Order of Registration under Section 12AA, and this remains valid unless withdrawn.
Role of Online Accounting Software in the 12AA Process
Maintaining accurate books is a vital part of running a non-profit. Without it, getting approval under 12AA of the Income Tax Act becomes quite difficult.
That’s where online accounting software can make your life easier. These tools help you:
- Organise financial statements for submission
- Keep donor records transparent
- Generate audit-ready reports
- Track income, expenses, and fund usage in real time
One such tool that is tailored for Indian organisations is Margbooks, a modern cloud based billing software that also includes accounting functionalities. Whether you’re an NGO or a small business, Margbooks ensures your financial data is secure, easily accessible, and compliant with Indian tax laws.
Why Choose Margbooks for NGOs?
Here’s how Margbooks stands out:
- Easy-to-use dashboard with accounting & billing features
- Customised solutions for non-profits
- Automated TDS, GST, and Income Tax reports
- Cloud-based access — perfect for remote teams
- Budget-friendly pricing for small and mid-sized organisations
Having a reliable tool, Margbooks, by your side during the 12AA application process means fewer errors and more confidence when submitting financial details.
Final Thoughts
Applying for registration under 12AA of Income Tax Act may seem like a lengthy process, but it’s completely manageable with a bit of planning — and the right tools. Once registered, your organisation can enjoy tax benefits and gain more trust from donors and partners.
Don’t forget, keeping your finances organised is half the battle won. So whether you’re just starting or running a well-established NGO, using various tools such as online accounting software or cloud based billing software, Margbooks can save time, reduce stress, and keep you ready for any scrutiny.
If you found this post useful, share it with others who might be navigating the same journey — let’s help more changemakers thrive in India!
