An NGO is a non-government organization with a charitable objective, for the betterment of the society in general. It can be started as a Trust, a Society or a Non-Profit Company [Section 8 Company], depending on the activity you wish to undertake. In India, NGO is an umbrella term for all non-profit organizations including Trust, Society and Section 8 Company. Other names for such not-for-profit organizations are “Sangathan”, “Sangh”, “Sangam”. Income tax exemption is available for all non-profit NGOs. These are sometimes confused with non-profitable companies, which refers to a regular business is not making a profit.
NGO registration is a profit that enables Nonprofit organisations to provide services to the public, often with the support of the government, corporations, individuals, or groups. It’s crucial for NGOs to comply with policy while serving the majority as a nongovernmental organisation.
An NGO is a non-governmental organisation that works to improve society at large through philanthropic endeavours. Depending on the activity you want to pursue, you can start it as a Trust, a Society, or a Non-Profit Company [Section 8 Company].
What are the Types of NGO Registration in India?
Trust
Trust registration refers to the process of legally establishing a trust in India. A trust is a form of non-profit organisation (NPO) that is created to provide assistance and support to specific causes, such as education, health care, and community development. The trust registration process is governed by the Indian Trusts Act, 1882, and is typically handled by a team of legal experts and professionals.
Society
Society registration refers to the process of forming a society under the Societies Registration Act, 1860. A society is a group of individuals who come together to achieve a common goal or objective. Societies are formed to promote charitable, religious, educational, scientific, literary, or social causes.
Section 8 Company
Section 8 Company is a type of non-profit organisation that is registered under Section 8 of the Companies Act, 2013. It is registered with the sole purpose of promoting commerce, art, science, religion, charity or any other useful object, and not for the purpose of making a profit. This type of company is also known as a Non-Profit Organisation or Non-Governmental Organisation (NGO).
Difference Between - Trust, Society & Section 8 Company
| Criteria | Trust | Society | Section 8 Company |
|---|---|---|---|
| Legal Framework | Indian Trust Act of 1882 | Societies Registration Act , 1860 | Companies Act, 2013 |
| Main Objective | Charitable activities | Public welfare activities | Promotion of science, arts, sports, etc. |
| Membership | Trustees | Members | Shareholders |
| Governing Body | Board of Trustees | Governing Council | Board of Directors |
| Governing Rules | Trust Deed | Memorandum and By-laws | Memorandum and Articles of Association |
| Registration | Registrar of Trusts in local jurisdiction | Registrar of Societies in the state | Registrar of Companies (ROC) |
| Tax Exemption | Section 12A and 80G of the Income Tax Act, 1961 | Section 12A and 80G of the Income Tax Act, 1961 | Section 8(1) and 12A of the Income Tax Act, 1961 |
Benefits of NGO Registration
Legal Status –A registered NGO gains the legal status and becomes accountable for the funds received. For instance, when an individual donates funds to a charitable trust, it is received under the name of the organization and used for the trust’s activities.
Tax Exemption- The registration of an NGO is necessary to seek tax exemption from the Income Tax Authority.
Bank Support- The basic requirement for running an NGO is to have a bank account under its name. In order to open an account, it is mandatory to be registered as a Trust, Society or Section 8 Company.
Recognition – An organization that is registered as an NGO reinforces the ethical, social and legal norms of our society.
Need for NGO Registration
NGO Registration done if you are willing to establish a non-profit organization and work with an objective towards the betterment or advancement of any particular section of the society. Getting NGO Registration provides legal authority to the entity and makes it more credible in the eyes of the law and contributors.
Eligibile to Start an NGO
- If an NGO is to be incorporated as a private limited company, there must be a minimum of two directors.
- In the case of incorporation as a public limited company, a minimum of three directors are necessary.
- 200 members is the maximum allowed for a private limited business.
- For a public limited company, there is no member limit.
NGO Registration Procedure
Step 1: Determine the Type of NGO: Choose the appropriate type of NGO structure, such as a trust, society, or section 8 company, based on the organization’s objectives and activities.
Step 2: Select a Unique Name: Select a distinctive name for the NGO that represents its mission and purpose and is not similar to any existing registered entities.
Step 3: Prepare the Memorandum of Association (MoA) and Articles of Association (AoA): Draft the MoA and AoA, which outline the objectives, rules, and regulations governing the NGO’s operations and management.
Step 4: Formulate the Governing Body: Establish a governing body or managing committee comprising individuals who will oversee the NGO’s functioning and decision-making processes.
Step 5: Provide a Registered Office Address: Designate a registered office address for the NGO, where official communications and legal documents can be sent.
Step 6: Prepare the Required Documentation: Gather the necessary documents, including identity proofs, address proofs, and photographs of the governing body members.
Step 7: File the Registration Application: Submit the registration application, along with the required documents, to the appropriate authority such as the Registrar of Societies, Registrar of Trusts, or Registrar of Companies, depending on the chosen NGO structure.
Step 8: Review and Approval: The registration authority will review the application and supporting documents. They may seek additional information or clarification, if necessary.
Step 9: Obtain the Registration Certificate: Upon successful review and approval, the registration authority will issue a registration certificate, confirming the legal status of the NGO.
Step 10: Apply for Tax Exemptions: After obtaining the registration certificate, apply for tax exemptions under the Income Tax Act by obtaining certifications such as 12A and 80G.
Step 11: Ensure Compliance and Reporting: Adhere to ongoing statutory requirements, including maintaining proper accounts, filing annual returns, and submitting audited financial statements.
FAQs
What are the tax benefits for NGOs in India?
NGOs in India can avail tax benefits under sections 12A and 80G of the Income Tax Act, which provide exemptions for earned income and donations received.
Can an NRI become a trustee in an Indian trust?
There is no explicit restriction on an NRI becoming a trustee in an Indian trust.