Section 12A and Section 80g. An NGO can avail income tax exemption by getting itself registered and complying with certain other formalities, but such registration does not provide any benefit to the persons making donations.
Applying for 12a certification: To enjoy the income tax exemption towards the income of nonprofit organizations like Trust, Society, Foundation or non-profit companies, they need to apply for 12a certification. After getting the 12a certification the organization gets the perfect legal entity. After receiving the 12a certification, the organization shall apply for 80G.
Apply for 80G certification: By showing their record of achievements in social welfare activities and by proving their service to the public. By getting this 80 G certification, an organization is privileged to provide tax exemption to the Donors who donate their organization. That is when an organization receives the donation from a public, individual or from a group it shall issue 80G tax exemption to the donor, where donors are entitled to donate their 10% of Gross total annual income. In that 10% of their donation, donors shall receive 10% tax exemption for their donation. So this type of certification gives the power to the organization to encourage their donation to donate more.