12A Registration
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12A registration for a charitable organization having charitable income of less than Rs.50 lakhs.
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12A Registration
Securing 12A Registration, sanctioned by the Income Tax Department, is a singular registration process tailored for trusts and other nonprofit organizations. The primary aim of this registration is to secure an exemption from income tax obligations. Typically, organizations seek 12A Registration shortly after their establishment. Nonprofit entities like Section 8 Companies, Trusts, and NGOs that successfully obtain 12A Registration gain the privilege of income tax exemption on their surplus income.
At Bmcs, we recognize the significance of acquiring Section 12A registration for your organization. We provide comprehensive support and guidance throughout the registration procedure, ensuring you unlock the benefits and privileges stipulated under Section 12A of the Income Tax Act.
Connect with Bmcs today to commence your journey towards Section 12A registration. Allow us to navigate the intricacies, enabling you to concentrate on making a positive impact in society.
At bmcsindia, we specialize in simplifying the OPC registration process, ensuring entrepreneurs can navigate the complexities of legal formalities smoothly. Our experienced team is dedicated to assisting you at every step, from document preparation to filing, providing expert guidance to help you make well-informed decisions regarding your OPC setup.Contact us now and take the first step towards realizing your entrepreneurial dream!
12A Registration – Overview
Upon establishing a Trust organization or NGO, it becomes imperative to register under Section 12A of the Income Tax Act to avail of exemptions outlined in Sections 11 and 12. Section 12A facilitates nonprofit entities such as Charitable Trusts, Nonprofit Organizations, Welfare Societies, Religious Institutions, etc., to benefit from complete tax exemption as per the provisions of the Income Tax Act of 1961.
Nonetheless, it is crucial to highlight that the failure to register for 12A places non-profitable trusts or NGOs in a taxable position, subjecting their financial receipts and transactions to taxation. It is noteworthy that private or family trusts are ineligible for such exemptions and cannot secure 12A Registration. Therefore, timely registration under Section 12A is not only advisable but also instrumental in ensuring the tax-exempt status of the organization.
The primary objective behind the creation of one-person companies was to promote entrepreneurship and encourage the formalization of Micro, Small, and Medium Enterprises (MSMEs). According to Section 2(62) of the Companies Act 2013, a company can be formed with just one director and one member, and interestingly, these roles can be held by the same individual.
Benefits of 12A Registration
The advantages associated with obtaining Section 12A Registration are as follows:
- Income Application: The funds utilized for charitable or religious purposes are considered the application of income. This means that expenses incurred for such purposes are considered when calculating the nonprofit organization's taxable income.
- Income Tax Exemption: Income received by the organization will be exempt from the charge of Income Tax. This exemption allows the organization to allocate more resources toward its philanthropic endeavors.
- Accumulation of Income: Registered entities can accumulate or set aside income for future use. However, the amount set aside should not exceed 15% of the funds for charitable or non-commercial purposes.
- Exclusion from Total Income: The income that is accumulated and considered as the income application is not included in the assessee's total income. This helps in reducing the tax liability of the organization.
- Access to Grants: NGOs with Section 12A registration are eligible to receive grants from both domestic and international sources. Various agencies and institutions specifically provide grants to NGOs that have obtained Registration under this section.
- One-Time Registration: The Registration granted under Section 12A is treated as a one-time registration. Once registered, the organization remains active until the date of cancellation, eliminating the need for periodic renewal.
- Flexible Benefits: Registered NGOs can avail themselves of the registration benefits as and when required, without any rigid renewal process. This flexibility allows organizations to use the benefits based on their needs and circumstances.
By obtaining Section 12A Registration, nonprofit organizations can unlock these valuable benefits, enabling them to effectively pursue their charitable and religious objectives while enjoying tax exemptions and financial support from various sources.
Eligible Entity for Section 12A registration
Section 12A registration is available to various types of entities that meet the eligibility criteria. The following entities are eligible for Section 12A registration:
- Legal Status: An OPC acquires a distinct legal entity status, shielding its founder from personal liability for company losses.
- Easy Fundraising: As a private company, OPCs often have an easier time securing funds from venture capitalists, angel investors, and banks compared to proprietorship firms.
- Reduced Compliance: OPCs benefit from specific exemptions from compliance requirements under the Companies Act, 2013, streamlining administrative obligations.
- Simple Incorporation: OPCs can be established with just one member and one nominee, with the member also serving as the director. The absence of a minimum paid-up capital requirement simplifies the incorporation process.
- Efficient Management: With a single individual managing the OPC, decision-making is swift, contributing to efficient company management without conflicts or delays.
- Perpetual Succession: OPCs maintain perpetual succession, ensuring the company's continuity even with only one member.
In conclusion, One Person Companies (OPCs) offer several advantages, including limited liability, ease of fundraising, reduced compliance, straightforward incorporation and management, and perpetual succession. These benefits make OPCs an attractive choice for entrepreneurs looking to establish their businesses while enjoying legal protection and simplified operational procedures.
Disadvantages of OPC
While OPCs offer advantages, there are also limitations:
To operate a proprietorship business in India, the proprietor is required to secure both PAN and Aadhar. Furthermore, they must obtain GST registration, UDYAM registration, and establish a current bank account. In certain states, compliance with the Shops & Establishment Act registration may also be mandatory.
It's important to note that, beyond these fundamental prerequisites, additional licenses and permits may be necessitated, contingent upon the specific industry, state, and local regulations.
- Suitable for Small Businesses: OPCs are primarily suitable for small-scale businesses as they can only have one member. This limitation can hinder their ability to raise additional capital as the business expands.
- Restriction on Business Activities: OPCs are subject to restrictions concerning certain business activities, such as non-banking financial investments and charitable objectives.
- Ownership and Management: There's a lack of a clear distinction between ownership and management in OPCs, as the sole member can also serve as the director. This arrangement may potentially give rise to ethical concerns or conflicts of interest.
Required Documents
As part of the OPC registration process, it’s crucial to prepare and submit several essential documents to the Registrar of Companies (ROC). These documents typically include:
- SMemorandum of Association (MoA)
- Articles of Association (AoA)
- The nominee's consent, along with their PAN card and Aadhaar card, must be submitted via Form INC-3.
- Proof of Registered Office
- The proposed director should furnish a declaration in Form INC-9 and their consent in Form DIR-2.
- A declaration by a qualified professional certifying that all necessary legal compliances have been adhered to.
Registration of One Person Company (OPC) in India
In India, the registration of a One Person Company (OPC) is facilitated through the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form, which has replaced the previous application forms for company incorporation.
The registration process for an OPC consists of two parts:
Part A: In this initial section of the SPICe+ form, the focus is on securing approval for the desired company name and applying for the Director Identification Number (DIN) or Permanent Account Number (PAN) for the proposed director.
Part B: The subsequent segment, known as Part B, involves providing incorporation-related details. Here, essential information such as the registered office address of the OPC, details about share capital, particulars of the director, and information about the shareholder is provided.
Here are the steps involved in the OPC registration.
Step 1:Obtain a Digital Signature Certificate (DSC)
Start by obtaining a Digital Signature Certificate (DSC) for the intended director of the OPC. The DSC is a crucial electronic signature used for electronically signing important documents throughout the registration process.
Step 2: Obtain Director Identification Number (DIN)
Next, acquire a Director Identification Number (DIN) for the proposed director from the Ministry of Corporate Affairs (MCA). The DIN is a unique identifier required for company directors in India.
Step 3: Name Reservation
Apply for name reservation through the MCA portal using Form SPICe+ (Part A). Ensure that the chosen name for your company is distinct and does not resemble any existing company or trademark. This step is essential to secure the desired name for your OPC.
Step 4: Prepare MOA and AOA
Draft the Memorandum of Association (MOA) and Articles of Association (AOA) for your company. These documents define the company’s objectives and internal rules, ensuring clarity and legal compliance.
Step 5: File the Forms
File the necessary forms with the MCA for OPC registration. Attach the relevant documents to the SPICe+ form, including MOA, AOA, declarations, proof of the registered office, nominee appointment, and any other documents required by the MCA. Ensure that all documents are complete and accurate to facilitate a smooth registration process.
Step 6: Certificate of Incorporation
Upon approval by the Registrar of Companies (ROC) and verification of compliance requirements, the ROC will issue a Certificate of Incorporation, signifying the successful registration of your One Person Company (OPC). Notably, the PAN number (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) are generated automatically during the incorporation process, eliminating the need for separate applications.
With this Certificate of Incorporation, your OPC is officially recognized and ready to commence its operations in India.
Why bmcsindia for OPC Registration?
Bmcsindia is the ideal partner for One Person Company (OPC) registration for several compelling reasons. With years of expertise in company registration and a deep understanding of the regulatory landscape, Bmcsindia simplifies the often complex OPC registration process.
We offer expert guidance, from name reservation to document preparation and submission. Our commitment to accuracy and compliance guarantees that your OPC registration adheres to all legal requirements, while our dedicated support team is readily available to address any queries or concerns you may have.
Get started now and embark on your entrepreneurial journey with confidence!
Post-Incorporation Formalities for OPC
Following the successful incorporation of a One Person Company (OPC), specific compliance formalities must be adhered to, similar to those applicable to private limited companies. Our experts are ready to assist you in fulfilling OPC compliance requirements, ensuring that your business remains in full legal compliance.
Udyam Registration can be obtained online to avail various benefits available for small and medium sized businesses. Once the GST registration is obtained, the bmcsindia team would help obtain UDYAM registration by submitting Aadhaar card, PAN card and GST certificate to Government.
Proprietorship vs Limited Liability Partnership (LLP) vs Company
| Features | Proprietorship | Partnership | LLP | Company |
|---|---|---|---|---|
| Definition | Unregistered type of business entity managed by one single person | A formal agreement between two or more parties to manage and operate a business | A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company. | Registered type of entity with limited liability to the owners and shareholders |
| Ownership | Sole Ownership | Min 2 Partners Max 50 Partners | Designated Partners | Min 2 Shareholders Max 15 Directors Max 200 Shareholders 1 Director 1 Nominee Director |
| Registration Time | 7-9 working days | |||
| Promoter Liability | Unlimited Liability | Limited Liability | ||
| Documentation | Partnership Deed | LLP Deed Incorporation Certificate | ||
| Governance | – | Under Partnership Act | LLP Act, 2008 | Under Companies Act,2013 |
| Transferability | Non Transferable | Transferable if registered under ROF | Transferable | |
| Compliance Requirements | Income tax filing if turnover is more than Rs.2.5 lakhs | ITR 5 | ||
Frequently Asked Questions
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To get started with BMCS India, simply reach out to us through our contact information on our website. We will be glad to schedule an initial consultation to understand your business requirements and discuss how our services can benefit you. From there, we will work together to develop a tailored plan to drive your business success.