One partner for the entire non-profit journey
Setting up a non-profit is not a single filing — it is a sequence of legal, structural and tax decisions that decide whether your organisation can receive donations, claim exemptions, access CSR funds and accept foreign grants. A single defective clause in the founding document can quietly block your 12A or 80G approval months later.
An NGO is a vehicle for a purpose, but in the eyes of the law it is also a taxable entity until it is properly registered and exempted. The Income-Tax Act treats the surplus of an unregistered charitable body like the profit of any business. Registration under Section 12AB changes that — but only if the entity has been built correctly from the first document onward. This is why structuring, drafting, incorporation and tax registration must be approached as one connected exercise rather than separate errands.
We bring Chartered Accountancy and Law together under one roof to handle every layer — entity structuring and drafting, incorporation before the correct authority, PAN/TAN and banking, 12A & 80G tax registration, and the NGO Darpan and CSR-1 registrations that unlock government and corporate funding — followed by the ongoing audit and compliance that keep your exemptions intact year after year.
Choosing your legal structure
The vehicle you choose shapes your governance, funding access and compliance burden for the entire life of the organisation. There is no single best form — only the form best suited to your objects, your funding strategy and how you intend to be governed. Here is how the three principal structures compare.
| Parameter | Public Charitable Trust | Registered Society | Section 8 CompanyBest for CSR |
|---|---|---|---|
| Governing Law | Indian Trusts Act, 1882* | Societies Registration Act, 1860 | Companies Act, 2013 |
| Best Suited For | Family-led philanthropy, focused charitable objects, simpler control | Membership-driven bodies — cultural, educational & welfare associations needing a democratic structure | Large-scale, CSR-funded & grant-seeking NGOs needing maximum credibility & structured governance |
| Key Constitutional Document | Trust Deed | Memorandum of Association + Rules & Regulations | Memorandum (MOA) + Articles (AOA) |
| Minimum Members Required | 2 Trustees (author + trustee) | 7 members (from 8 states for all-India) | 2 members & 2 directors (Private) |
| Governance Style | Trustees with wide control; least formal ongoing governance | Elected governing body; members vote; moderate formality | Board of directors; highest transparency & disclosure |
| Approving Authority | Sub-Registrar of Assurances | Registrar of Societies (RoS) | Registrar of Companies (RoC), MCA — Section 8 licence |
| Credibility with Funders | Moderate | Moderate to good | Highest — preferred by corporates & large grant bodies |
Our implementation timeline — idea to fundable entity
A logical, sequenced workflow with no missed dependencies. Each step unlocks the next, and the order matters — you cannot obtain tax registration before the entity, its PAN and its bank account exist.
Structural Consultation & Drafting
We assess your objects, funding goals and control needs, then recommend the right vehicle and draft a watertight Trust Deed / MOA & AOA aligned with Ministry and Income-Tax guidelines — paying special attention to the objects, application-of-income and dissolution clauses that decide 12A/80G approval.
Outcome: a registration-ready founding documentIncorporation & Registration
We file and register the entity with the correct authority — Sub-Registrar (Trust), Registrar of Societies (Society) or MCA / RoC under a Section 8 licence — and obtain your incorporation certificate.
Outcome: a legally incorporated NGOPAN, TAN & Compliant Bank Account
We secure the entity's PAN and TAN and assist in opening a compliant current account in the organisation's name — the operational backbone for receiving donations and grants and for deducting and depositing TDS where required.
Outcome: ready to transact & receive fundsSection 12AB & 80G Tax Registration
We file Form 10A on the Income-Tax portal to obtain 12AB registration (exempting the organisation's income) and 80G approval (enabling tax deductions for your donors), and guide you on provisional-to-regular conversion through Form 10AB.
Outcome: tax-exempt entity & donor benefitsNGO Darpan & CSR-1 Registration
We complete your NITI Aayog NGO Darpan registration (the Unique ID required for government grants) and file Form CSR-1 with the MCA — the mandatory clearance to legally receive CSR funding — and advise on FCRA where foreign funding is intended.
Outcome: eligible for government & CSR funds
A rejected 12A or 80G application almost always traces back to a poorly drafted founding document — not an ineligible cause.
Understanding 12A, 12AA, 12AB, 80G & the exemption framework
This is the heart of NGO taxation — and the area where most organisations get into difficulty. The sections below explain, in plain language, exactly how a charitable institution's income is exempted, how donors benefit, and the conditions that must be met to keep the exemption alive.
The evolution: 12A → 12AA → 12AB
People often use "12A registration" as a catch-all term, but the law has moved through three stages. Understanding the difference matters because the current obligations all flow from the latest regime.
The original enabling provision under which a trust or institution registered to claim exemption of its income. It established the principle that registered charitable bodies are exempt, subject to conditions.
Prescribed the detailed registration procedure the Commissioner followed — examining the objects and genuineness of activities before granting registration. This was the operative process for many years.
The present regime. All charitable institutions — new and existing — must hold 12AB registration. It introduced time-limited, renewable registration in place of the earlier perpetual registration.
How the income exemption actually works — Sections 11 & 12
Holding 12AB registration is the gateway, but the exemption itself lives in Sections 11 and 12 of the Income-Tax Act. These sections exempt the income of a registered trust or institution to the extent it is applied to charitable or religious purposes in India. The single most important condition is the application requirement.
RULE
The 85% application rule
To retain full exemption, a registered NGO must apply at least 85% of its income towards its charitable objects during the year. The remaining up to 15% may be accumulated or set apart indefinitely without any conditions. Income that is neither applied nor validly accumulated becomes taxable.
If the NGO wishes to accumulate more than 15% for a specific future project (say, constructing a school building), it can do so — but it must file Form 10, specify the purpose, and generally apply the accumulated amount within five years. Failing to use it within the window makes it taxable in the year the period expires.
Where the money must be kept
Accumulated funds and the corpus cannot simply sit anywhere. Section 11(5) lists the permitted modes — broadly, government securities, deposits with scheduled banks, post-office deposits and other notified instruments. Parking funds outside these modes (for example, in a private company's shares or an unapproved instrument) can result in loss of exemption on that amount. We build the investment policy into your compliance calendar so this is never breached inadvertently.
Corpus donations
A corpus donation is a voluntary contribution received with a specific written direction from the donor that it shall form part of the corpus (the permanent fund) of the trust or institution. Such donations are not treated as income and are not subject to the 85% application rule — provided they are invested and kept invested in the Section 11(5) modes. Corpus donations are a powerful way to build a stable endowment, but the written direction and the investment condition are both essential; without them, the contribution is treated as ordinary income.
80G — the donor's benefit, and how it is administered
While 12AB exempts the NGO's income, 80G rewards the donor. An 80G-approved institution can offer its donors a deduction from their taxable income, which is one of the strongest reasons donors choose a registered organisation over an informal one. Understanding the mechanics helps you fundraise confidently.
How the donor deduction works
- Deduction rate: donations to most 80G-approved NGOs qualify for a 50% deduction. Certain government-notified funds qualify for 100%. So a typical donor effectively deducts half of what they give.
- Qualifying limit: for most institutions, the donation eligible for deduction is capped at 10% of the donor's adjusted gross total income. Donations above that ceiling do not get extra deduction.
- Cash limit: a cash donation above ₹2,000 does not qualify. To be deductible, larger gifts must come through banking channels — cheque, draft, UPI or bank transfer.
- Mandatory reporting: the institution must file Form 10BD (the statement of donations) and issue Form 10BE (the donation certificate) to each donor — the donor relies on Form 10BE to claim the deduction.
In short, on a ₹20,000 gift the donor reduces taxable income by ₹10,000. That tangible benefit — backed by a proper Form 10BE certificate — is what turns a sympathetic individual or company into a repeat donor.
Other exemptions & routes you should know
(23C)
Section 10(23C) — schools & hospitals
Specified educational institutions and hospitals existing solely for educational or philanthropic purposes and not for profit can claim exemption under Section 10(23C) instead of the 11/12 route. An institution generally chooses one of the two routes — 10(23C) or 12AB — and the better choice depends on the nature of activity, the receipts, and the approval thresholds. We assess which route fits your institution before you commit.
Section 13 — what can void your exemption
Section 13 withdraws exemption where the income or property benefits specified persons — founders, trustees, substantial donors and their relatives — for example through unreasonable salaries, interest-free loans, or use of property without adequate rent. Genuine, arm's-length, well-documented payments for real services are fine; related-party leakage is not. Getting governance and documentation right from the start keeps you safely outside Section 13.
TD
Accreted income — the exit tax
If a registered NGO converts into a non-charitable form, merges with a non-eligible entity, or fails to transfer its assets to another eligible institution on dissolution, the net value of its assets can be taxed as accreted income at the maximum marginal rate. This is precisely why the dissolution clause in your Trust Deed or MOA must be drafted correctly — a defective clause can create a large, avoidable tax liability years later.
Mandatory post-registration compliance
Registration is the beginning, not the end. The exemptions you secure must be maintained every year through correct filings — and lapses are the most common reason exemptions are cancelled. We provide year-round support so your status is never at risk.
Documents required
The exact set depends on your chosen structure, but the core documents fall into the groups below. Having these ready accelerates both incorporation and tax registration.
👤 For Founders / Trustees / Directors
- PAN card of each founder, trustee, member or director
- Aadhaar card and one more address proof
- Recent passport-size photographs
- For Section 8 — Digital Signature (DSC) & DIN
- Mobile numbers and email IDs (for portal OTPs)
🏢 For the Registered Office
- Proof of registered office address
- Latest utility bill (electricity / water / gas)
- No-Objection Certificate from the owner (if rented)
- Rent agreement, where applicable
📜 For the Entity & Constitution
- Trust Deed, or MOA + Rules, or MOA + AOA
- Clear statement of charitable objects
- Proposed name(s) of the organisation
- List of members / governing body / board
🧾 For 12AB / 80G & Funding
- Entity PAN and registration certificate
- Note on activities and intended beneficiaries
- Projected or actual financial statements
- Bank account details of the organisation
- For FCRA — three years of activity & accounts
Why a Chartered Accountant firm is critical
A rejected 12A or 80G application almost always traces back to a poorly drafted founding document — not an ineligible cause. The objects clause, the application-of-income provisions, the irrevocability and dissolution clauses must satisfy Income-Tax scrutiny before you file.
A professional CA firm structures the entity so the registration is approved the first time, liaises directly with the Sub-Registrar, RoC and tax authorities, and keeps every downstream exemption defensible at audit — the 85% application, the Section 11(5) investments, the 80G donation reporting and the dissolution clause that guards against accreted-income tax. With qualifications spanning Chartered Accountancy and Law (CA · LLB · LLM), Lalit Tyagi & Company builds your organisation to hold up under the closest examination — so you can focus on the mission, not the paperwork.
Frequently asked questions
Everything founders, trustees and CSR teams ask us about NGO structuring, tax exemption and funding registrations. Search to jump to any topic.
Build your NGO on a foundation that holds
Entity structuring, incorporation, 12AB & 80G, NGO Darpan, CSR-1, FCRA and ongoing compliance — handled end to end by Lalit Tyagi & Company for founders, trusts and CSR teams across Hapur, Ghaziabad, Noida, Meerut, Delhi NCR and across India.