NGO INTRODUCTION
NGO INTRODUCTION
India is the land of NGOs. Nowadays in India the highest number of non governmental organisations were occupied for performing the various activities. The registered NGO availed several beneficials from the government. If you are going to start an NGO in India. Registration is essential for better society progress.
What is an NGO?
NGOs, or Non-Governmental Organizations, also recognized as Non-Profit Organizations, are instrumental entities dedicated to the betterment and progress of society in India. These organizations actively contribute to societal well-being, focusing on areas such as health, religion, and education for the benefit of the general public. NGOs in India operate within a legal and regulatory framework governed by various acts. These acts provide a foundation for their establishment, functioning, and compliance. Key acts governing NGOs include:
- 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
This comprehensive regulatory framework ensures that NGOs operate transparently, maintain accountability, and contribute effectively to societal development. It also delineates the legal parameters within which these organizations can fulfil their altruistic missions.
Benefits of registering an NGO:
1. Credibility and Trustworthiness:
Attracting Donors: Government registration enhances the NGO’s credibility, attracting donors who value transparency and accountability. It fosters trust among private individuals, government entities, donor agencies, and fellow NGOs, encouraging contributions.
Consistent Image: Beyond attracting donors, government registration plays a pivotal role in maintaining consistent brand recognition.
Strengthened Identity: A registered NGO is recognized for its commitment to transparency, reinforcing its identity and trustworthiness in the eyes of stakeholders and the wider community.
Establishing Corporate Bank Account: Registration enables the NGO to establish a corporate bank account, symbolising financial transparency and elevating overall credibility, making it more appealing to potential contributors.
2. Attaining Fiscal Benefits through Tax Exemption :
Strategic Registration: Registering as an NGO under the Companies Act, 2013 provides access to a range of tax advantages, allowing redirected funds towards diverse projects.
Tax Deductions for Donors: Registered public charities offer donors the benefit of deducting their contributions from taxes, serving as an incentive for increased contributions.
3. Independent Entity:
Asset Acquisition: A registered NGO allows founders or trustees to purchase property, office space, and vehicles for the organization.
Separate Identities: This process distinctly establishes both the founder and the NGO as separate entities, allowing for strategic asset ownership and utilisation.
Protective Mechanism: Strategically acquiring and registering assets under the NGO’s name acts as a safeguard against unforeseen events, such as foreclosures, bankruptcies, judgement debts, or divorces.
Liability Limitation: By designating the NGO as an independent legal entity, founders and trustees are shielded from unlimited personal liability.
4. Perpetual Succession:
Extended Lifespan: Registered trusts, aiming to help many people, enjoy perpetual succession, persisting even in the absence of founders or trustees. The organization continues to exist unless formally wound up by an Indian Court order.
5. Legal Recognition:
Bank Account Accessibility: Legally recognized NGOs can open bank accounts and apply for bank cards, similar to any other business. Registration safeguards the organization’s name nationwide, preventing unauthorised use or adoption of similar names.
Corporate Image and Brand Identity: Legal recognition fortifies the corporate image and brand identity, establishing the NGO as a credible and trustworthy entity in the eyes of stakeholders.
6. Stamp Duty Exemption for Financial Prudence:
Section 8 Companies Act 2013: NGOs categorised under Section 8 benefit from comprehensive stamp duty exemptions under the Income Tax Act. This strategic exemption enhances the organization’s tax-saving avenues, allowing resources to be directed towards fulfilling outlined objectives
Different types of NGO Registration :
The registration of Non-Governmental Organizations (NGOs) in India is categorised into three distinct types, each falling under the governance of specific legal statutes. These registrations are tailored to the unique nature and objectives of the NGOs:
- 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 stands as the formalised procedure for establishing a non-profit organization, guided by the Trusts Act of 1882. Within this framework, entities known as public charity trusts or private trusts are instituted with the overarching goal of providing assistance to individuals navigating the challenges of an insecure and evolving society. The pivotal distinction between a public and private trust lies in whether the beneficiaries represent a significant segment of the general public.
These trusts are conceived to serve a multitude of noble causes, such as alleviating poverty, extending support to those in distress, promoting educational initiatives, facilitating access to medical care, and more. The creation of trusts is a tangible expression of a commitment to addressing societal challenges and actively contributing to the overall well-being of the community.
DOCUMENTS REQUIRED FOR TRUST REGISTRATION
- The respective stamp Values for the trust deed
- PAN card of the parties.
- Address and identity proof of the parties involved also with two witnesses.
- Address proof of the Trust resigned office.
- Photo copies of the parties and two witnesses.
- NOC (No Objection Certificate copies for maintaining trust )
- Income tax certificate of 12A registration and 80 G certificates for the Tax exemption for the trust.
2. Society Registration:
Society registration offers an alternative and collaborative path for formalising an NGO. This method involves individuals uniting with a shared commitment to pursue scientific, charitable, and multifaceted objectives. The culmination of this collective effort results in the establishment of a society, guided by the stipulations outlined in Section 30 of the Society Registration Act of 1860. This legislative framework was enacted to enhance the legal provisions governing society registration, with a focus on the promotion of literature, fine arts, science, and the dissemination of knowledge for various benevolent purposes. The registration requires a minimum of 7 members. The founder can be an individual, a company or a foreign national.
DOCUMENTS REQUIRED FOR SOCIETY REGISTRATION:
- Name and details of the members
- Address and Designation of all the members
- The object of the Society
- Memorandum of Association
- Rules and Regulations of Society
- Affidavit of president/secretary stating the relationship between the subscribers.
- Address proof of the office of the society and no objection certificate from the land owner.
3. Section 8 Registration:
Section 8 within the ambit of the Indian Companies Act of 2013 unfolds a distinctive avenue for the establishment of non-profit organizations (NGOs). These entities are dedicated to championing diverse causes, encompassing charities, religions, and trade. Unlike conventional companies, the proceeds generated by a Section 8 company are not distributed among shareholders but are instead harnessed 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.
DOCUMENTS REQUIRED FOR SECTION 8 COMPANY REGISTRATION
- Aadhar card or PAN card of all Directors
- Passport Size photos
- Voter ID/Aadhar Card of all Directors
- Self-attested copy of address proof like Bank statement, mobile bills, electricity bills (not older than 2 months)
- Registered Office Documents
- Rent/ lease agreement
What is the difference between setting up a trust and a society?
In the domain of non-governmental organizations (NGOs), the selection between a “society” and a “trust” as legal frameworks for establishment and registration carries inherent differences. While the terminology and legal criteria may vary, the following general disparities highlight the distinctions between a society and a trust in the context of NGO registration:
SUBJECT | SOCIETY | TRUST |
Legal framework | Formation under Societies Registration Act. | Establishment through a trust deed governed by trust laws. |
Organisational 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 is essential to note that the precise legal prerequisites and terminologies may vary across jurisdictions. Aspiring individuals should seek guidance from applicable laws and regulations in their specific region, recognizing that some countries may offer alternative legal structures for NGOs, such as foundations or non-profit companies.
Tax exemption for NGO in India :
Non-Governmental Organizations (NGOs), driven by a mission of societal welfare rather than profit, operate within a framework defined by legal obligations. While their focus lies on the well-being of the communities they serve, it is imperative to acknowledge that NGOs function within the parameters established by the law. The Income Tax Act comprehensively includes the income and donations earned by NGOs, necessitating a nuanced understanding of their treatment, particularly concerning tax exemptions.
Mission-Driven Operations:
NGOs, exemplified by organizations like Smile Foundation and Save the Children India, are mission-driven entities committed to the welfare of the populace and the advancement of their chosen causes.
Legal Compliance:
Contrary to running by their own rules, NGOs adhere to the legal framework and obligations stipulated by the law. This includes strict compliance with the Income Tax Act.
Tax Exemption Landscape:
The Income Tax Act brings the income and donations received by NGOs under its purview. However, specific provisions allow for tax exemptions, especially when these funds are directed towards charitable or religious objectives.
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:
Eligibility: NGOs established before April 1, 2021, are eligible for 12A registration to claim tax exemption on donations.
Application Process: The NGO must apply for registration under Section 12A, submitting essential legal documents to the commissioner or principal commissioner for verification.
Approval Process: The approval or rejection of the application rests on the commissioner’s assessment, and acquiring the 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, a Section 8 Company, provides a Certificate of Incorporation and copies of MoA & AoA.
80G Registration:
Application Process: NGOs seeking tax benefits for donors must apply for 80G certification by submitting form 10G.
Supporting Documentation: Alongside the 10G form, a three-year activity report and the mandatory 12A certificate are required.
Digital Submission: The 10G form can be downloaded online, necessitating a digital signature or electronic code for submission.
Audit Report Requirement: A comprehensive three-year audit report is essential to complete the application process and grant tax exemptions to donors contributing to the NGO.
Documents Required to Secure 80G 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
Understanding the intersection of NGO operations, legal obligations, and tax considerations is crucial for NGOs to thrive in their pursuit of societal well-being. The delicate balance between mission-driven initiatives and compliance with tax regulations underscores the complexity of the landscape in which NGOs operate.
FOREIGN CONTRIBUTION (REGULATION) ACT, 2010:
FCRA REGISTRATION
Charitable Trusts, Societies, and Section 8 Companies that receive foreign contributions or donations are mandated to secure registration under Section 6(1) of the Foreign Contribution Regulation Act, 2010, commonly known as FCRA registration. This registration is a crucial regulatory step for entities in India engaging with foreign sources for funding charitable activities.
ELIGIBILITY CRITERIA FOR FCRA REGISTRATION:
To qualify for registration under FCRA, the association must meet specific eligibility criteria:
Statutory Registration:
The association should be registered under existing statutes like the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 8 of the Companies Act, 2013.
Existence and Activity:
The association must have been in existence for a minimum of three years.
It should have undertaken reasonable activities in its chosen field, benefiting society and aligning with the intended utilisation of foreign contributions.
Expenditure Threshold:
The applicant NGO/association is required to spend a minimum threshold amount of Rs. 15.00 lakh during the last three years.
The association has the flexibility to choose items of expenditure, excluding administrative expenses defined in Rule 5 of FCRR, 2011.
Capital Investment Undertaking:
If the association desires inclusion of capital investments in assets such as land, buildings, vehicles, and equipment, the Chief Functionary must provide an undertaking.
The undertaking assures that these assets will be exclusively utilised for FCRA activities and will not be diverted for any other purpose as long as FCRA registration of the NGO is active.
PROCEDURE FOR FCRA REGISTRATION:
The process for obtaining FCRA registration involves detailed scrutiny and adherence to statutory requirements. Entities seeking FCRA registration must navigate the procedural intricacies to ensure compliance with the Foreign Contribution Regulation Act, 2010. In essence, FCRA registration is not only a regulatory obligation but also a strategic step for charitable entities engaging with foreign contributions, ensuring transparency, and aligning activities with the regulatory framework.
FAQ
FAQS
Q. How to register an NGO?
Registering an NGO in India involves adhering to the specific legal frameworks applicable to the chosen organisational structure. As mentioned above, there are three primary types of NGOs, each requiring registration under its respective law:
- Societies:
Societies must be registered under the Tamil Nadu Societies Registration Act, 1975.
- Trusts:
Trusts need to undergo registration under the Indian Trust Act, 1882.
- Companies:
Companies operating as NGOs should be registered under Section 25 of the Companies Act, 2013.
Recent reports indicate that approximately 3 million NGOs are legally registered in India, highlighting the significant role these organizations play in diverse sectors.
To attain recognition as an NGO, it is imperative for the organization to complete the registration process under the relevant law, ensuring compliance with legal requirements.
Q. What are the 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
Q. 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.
Q. Who is the regulating body of NGOs in India?
The Ministry of Corporate Affairs (MCA) stands as the key regulatory body overseeing NGOs in India. The regulatory framework applicable to an NGO is determined by its chosen organisational structure, whether registered under the Societies Registration Act, Trusts Act, or Companies Act. This nuanced approach ensures that NGOs adhere to specific regulations aligned with their selected legal structure, with the Ministry of Corporate Affairs playing a pivotal role in ensuring compliance.
Q. What are the key factors influencing the timeline for NGO registration in India, and how can professional assistance contribute to expediting the process?
The timeline for registering an NGO in India is contingent upon its type. Societies and trusts typically conclude within a few weeks, while Section 8 companies may extend to months, awaiting central government approval. For those pursuing FCRA registration for foreign contributions, the process may span several months. The efficiency of the application process and the completeness of required documents significantly impact the timeline. Opting for professional assistance can play a pivotal role in expediting the registration process, ensuring adherence to regulatory norms and minimising delays.
NGO INTRODUCTION
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