NGO REGISTRATION
NGO INTRODUCTION
What is an NGO?
The full name of NGOs is Non-Governmental Organizations (NGOs), also known as Non-Profit Organizations. NGOs play an important role in the development and improvement of society in India. NGOs are formed to improve the health, religion, or education of the general public.
In India NGOs established under section 8 of the Companies Act, 2013, and other Acts that govern NGOs in India are
- Tamil Nadu Societies Registration Act, 1975
- Societies Registration Act, 1860
- Indian Trust Act, 1882
- The Companies Act, 2013
- Foreign Contribution (Regulation) Act, 2010
- Income Tax Act, 1961
Benefits of registering an NGO :
Credibility and trustworthiness:
Registering an NGO under government regulations attracts donors and can easily gain credibility with donors. Improved credibility and trustworthiness help the NGO to Establish a corporate bank account not only symbolizes financial transparency but also elevates the NGO’s overall credibility. Private individuals, government entities, donor agencies, and fellow NGOs are more inclined to contribute when assured of the organization’s official registration status, a prerequisite for opening such an account.
Attain Fiscal Benefits through Tax Exemption:
Strategic registration of your company as an NGO under the Companies Act, 2013 provides access to a myriad of tax advantages. NGOs, benefiting from exemptions across various taxes, can redirect saved funds towards the advancement of diverse projects. If you are a registered public charity, donors can deduct their donations from their taxes. This can encourage donors to contribute more.
Independent entity:
With a registered NGO, the founder or trustees can purchase property for the foundation, such as office space and vehicles. In addition, both the founder and the foundation are considered to be separate entities. As an NGO is Independent entity Strategically purchasing, acquiring, and registering assets and stakes under the NGO’s name serves as a protective mechanism against unlimited liability stemming from unforeseen events such as foreclosures, bankruptcies, judgment debts, or divorces.
Perpetual succession:
Often trusts are set up by the founder to help many people. However, a registered trust can help many people and enjoy an unbounded lifespan, persisting even in the absence of founders or trustees, i.e. it exists whether the founder is alive or not but the only circumstance leading to cessation is a formal winding-up process initiated by an Indian Court order, allowing for the concept of perpetual succession.
Legal recognition:
A registered NGO is legally recognized and can open a bank account and apply for a bank card just like any other business and upon registering an NGO the organization’s name is safeguarded across the entire nation, precluding any unauthorized use or adoption of similar names. This protective measure serves to fortify the corporate image and brand identity.
Stamp Duty Exemption for Financial Prudence:
Section 8 Companies Act 2013, characterized as NGOs, benefit from comprehensive stamp duty exemptions under the Income Tax Act. This strategic exemption amplifies the organization’s tax-saving avenues, which can then be channeled into the realization of its outlined objectives.
Different types of NGO Registration :
There are Three types of NGO registration and each of the following is governed by different laws and they were:
- Trust registration under “The Indian Trust Act, 1882”
- Society registration under “Societies Registration Act, 1860”
- Section 8 company registrations under “The Companies Act, 2013”
1. Trust registration:
Trust registration is the formal process of enrolling a non-profit organization under the Trusts Act of 1882. These entities, referred to as public charity trusts or private trusts, are established to assist individuals within a society marked by insecurity and change. The crucial distinction between a public and private trust lies in whether the beneficiaries represent a substantial segment of the general public.
Trusts can be formed for a variety of noble causes, including extending aid to those facing poverty or distress, supporting educational endeavors, facilitating access to medical care, and more. The creation of trusts reflects a commitment to addressing societal challenges and contributing to the overall well-being of the community.
2. Society Registration:
An alternative route to formalize your NGO entails leveraging the societal structure. Individuals join forces with a shared commitment to pursue scientific, charitable, and multifaceted objectives, culminating in the establishment of a society under the stipulations outlined in Section 30 of the Society Registration Act of 1860.
3. Section 8 Registration:
Section 8 within the framework of the Indian Companies Act of 2013 provides a distinctive avenue for the establishment of non-profit organizations (NGOs). These entities are committed to championing diverse causes such as charities, religions, and trade. In contrast to conventional companies, the proceeds generated by a Section 8 company are not disseminated among shareholders; rather, they are utilized for advancing the organization’s mission. The choice between forming a public limited company, necessitating a board of three directors, or a private limited corporation, with a minimum requirement of two directors, adds flexibility to the structure of these entities.
What is the difference between setting up a trust and a society?
In the realm of non-governmental organizations (NGOs) and their registration, the terms “society” and “trust” signify two distinct legal frameworks frequently employed for the creation and registration of NGOs in diverse countries. While the precise terminology and legal criteria may fluctuate, here are general disparities between a society and a trust concerning NGO registration:
SOCIETY | TRUST |
Legal framework: Formation under Societies Registration Act. | Establishment through a trust deed governed by trust laws. |
Organizational Structure: Membership-based with voting rights. | Governed by trustees; no traditional membership structure. |
Governance Models: Democratic decision-making by members or elected governing bodies. | Decision authority vested in trustees as per trust deed terms. |
Mission and Focus: Objects outlined in constitution or memorandum of association. | Objectives specified in the trust deed, typically for charitable purposes. |
Registration Procedures: Registrar of Societies or equivalent regulatory authority. | Registration with the charity commissioner or relevant regulatory body. |
It’s vital to acknowledge that the specific legal prerequisites and terminology may vary across jurisdictions. Individuals aspiring to establish an NGO should seek guidance from the applicable laws and regulations in their particular region. Additionally, some countries may present alternative legal structures for NGOs, such as foundations or non-profit companies.
How to register an NGO ?
As mentioned above, there are three types of NGOs. These NGOs can be registered under their respective laws, i.e. a society needs to be registered under the Tamil Nadu Societies Registration Act, 1975; a trust needs to be registered under the Indian Trust Act, 1882; a company needs to be registered under Section 25 of the Companies Act, 2013.
According to a recent report, around 3 million NGOs are legally registered in India. To be a recognised NGO, an organization must be registered under the relevant law.
Documents needed to register an NGO:
- Memorandum of Association (MoA) and Articles of Association (AoA)
- Identity proof of the board of directors or trustees
- Proof of registered office
- Affidavit
- Letter of Authorisation
- Bank account details
- NOC from landlord
Tax exemption for NGO in India :
NGOs, like Smile Foundation and Save the Children India, focus on societal well-being rather than profit. Supported by public donations, their recorded income may qualify for tax exemptions when utilized for charitable or religious purposes. More about NGOs Tax exemption are stated below;
Provision used by NGO to claim tax Exemption:
- 12A- Registration certificate helps the NGO to claim tax exemption from the income tax department.
- 80G- Registration Certificate helps the NGO to attract donors to donate funds for development of Organisation. Without these Registration certificates NGO cannot receive tax exemption.
12A Registration:
To secure tax exemption on donations, an NGO must undergo registration under Section 12A of the Income Tax Act (1961). NGOs established before April 1, 2021, must apply for legitimate registration, submitting essential legal documents to a commissioner or principal commissioner for verification. Approval or rejection of the application depends on the commissioner’s assessment. Acquiring a 12A certificate subsequently exempts the NGO’s income from taxes.
Documents Required to Secure 12A Certificate:
- Form 10A
- Pan Card in the Name of Organization
- Required documents for creation of NGO like (MOA,AOA, trust deed etc.
- Last three consecutive year financial statement
- For instance For a Section 8 Company, provide a Certificate of Incorporation and copies of MoA & AoA.
80G Registration:
NGOs can secure tax benefits for donors through the 80G certification from the Income Tax Department. To apply, NGOs must submit form 10G with a three-year activity report, alongside a mandatory 12A certificate. The 10G form can be downloaded online, requiring a digital signature or electronic code. A comprehensive three-year audit report is also necessary, ultimately granting tax exemptions to NGO donors.
Documents Required to Secure 12A Certificate:
- PAN card of the NGO
- Donor list with PAN and addresses
- MoA and Registration Certificate (Societies & Section 8 Companies); Trust Deed (Trusts)
- Certificate of Incorporation
- NOC for rented office
- IT Returns and Book of Accounts (last 3 years)
- Form 10G
- Welfare activities list
- Trust Deed (if applicable)
- Latest utility bills
- Board of Trustees details
FAQ
FAQ ON NGO REGISTRATION :
1. Significance of FCRA Registration for NGOs?
FCRA registration is a prerequisite for Indian NGOs receiving foreign contributions, regulated by the Ministry of Home Affairs. This process, conducted online, ensures transparency and guards against fund misuse. Registration, valid for five years, requires renewal. NGOs without FCRA registration can seek prior permission for specific foreign contributions. Adhering to FCRA regulations, including maintaining separate accounts, is imperative for transparency and accountability. Non-compliance may result in penalties or the revocation of FCRA registration, impacting an NGO's ability to receive foreign funds.
2. Who is the regulating body of NGOs in India?
The Ministry of Corporate Affairs (MCA) plays a pivotal role in regulating NGOs in India. The applicable regulatory framework is determined by the organizational structure chosen by the NGO, with compliance mandated under the Societies Registration Act, Trusts Act, or Companies Act. This tailored approach ensures that NGOs align with the specific regulations corresponding to their selected legal structure.
3. What are the limitations on the political involvement of NGOs?
In accordance with established regulations, NGOs are mandated to focus primarily on achieving specific objectives related to social, environmental, or humanitarian causes. Consequently, these organizations are restricted from actively participating in political activities or aligning with political parties.
4. What are the key factors influencing the timeline for NGO registration in India, and how can professional assistance contribute to expediting the process?
The registration timeline for an NGO in India depends on its type. Societies and trusts usually take a few weeks, whereas Section 8 companies may require a few months due to central government approval. If seeking FCRA registration for foreign contributions, the process can extend to several months. Efficiency and document completeness influence the timeline, and professional assistance can expedite the process.
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