A non-governmental organization (NGO) is a legally constituted organization created by natural or legal persons that operates independently from any government. Also known as Non-profit organizations or NPO. A NPO is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Examples of NPOs include charities (i.e., charitable organizations), trade unions, trade associations and public arts organizations.
Non-profit organisations in India (a) exist independently of the state; (b) are self-governed by a board of trustees or ‘managing committee’/ governing council, comprising individuals who generally serve in a fiduciary capacity; (c) produce benefits for others, generally outside the membership of the organisation; and (d), are ‘non-profit-making’, in as much as they are prohibited from distributing a monetary residual to their own members.
Whether a trust, society or section-25 company, the Income Tax Act gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to non-profit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FC(R)A regulations and the Home Ministry.
Formation and Registration of a Non -Profit organisations in India
1) Trust
2) Society
3) Section-25 Company
I. Trusts
A public charitable trust is usually floated when there is property involved, especially in terms of land and building. Validity extends only in original state it was registered in. The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. It is exempt from Income Tax only in the state registered and 80G is applicable.
II. Society
The following societies can be registered under the Act: ‘charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.’
The main instrument of any society is the memorandum of association and rules and regulations (no stamp paper required), wherein the aims and objects and mode of management (of the society) should be enshrined. A Society needs a minimum of seven managing committee members. A society cannot have chapters (branches) outside state it is registered, although members could be from anywhere in India.
III. Section-25 Company
It can be established ‘for promoting commerce, art, science, religion, charity or any other useful object’, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. They need a minimum of three trustees.
Start a non profit organization like trust, society, section 25 company anywhere in India.
