The income tax act under section 12a gives ngos and charitable institutions the advantage of paying no tax on their income as long as they are 12a registered. In this registration the sum raised towards social, educational or charitable work is not subject to taxation and therefore the available resources are maximized to serve welfare work. After the approval the organization should keep good accounts and follow the reporting requirements. Donors also feel assured to donate as they are sure that the ngo is a legal entity. Section 12a is thus crucial to ngos that aim at achieving financial sustainability and at the same time help in social development in India.