TYPES OF NGO’s

Mrs.Annamma Samuel

Head-Research

INTRODUCTION

Constitution of India, Article 19(1)(c)

The right of all citizens to form associations or unions

AN ASSOCIATION OF PERSONS WITH NON-PROFIT MOTIVE MAY BE REGISTERED

As a Charitable Trust

As a Society registered under the Societies Registration Act

As a Company under section 25 of the Companies Act

NON-PROFIT ORGANIZATIONS IN INDIA

Exist independently of the state Self-governed by a board of trustees or

‘managing committee’/ governing council Produce benefits for others, generally

outside the membership of the organisation.

Are ‘non-profit-making’, Prohibited from distributing a monetary

residual to their own members.

TRUST Public charitable trusts

No central law governing public charitable trusts

Indian Trusts Act 1882

Whether a trust is public or private? The class to be benefited constitutes a

substantial segment of the public.

PROCEDURES &PURPOSESOF FORMATION

Can be created in Any Language No technical words necessary Relief of Poverty or Distress Education Medical Relief Advancement of any other object of

general public utility Excluding purposes which relate

exclusively to religious teaching or worship.

A trust deed, generally, incorporates the following:

The name(s) of the author(s)/settlor(s) of the trust; The name(s) of the trustee(s); The name(s) if any, of the beneficiary/ies or whether it shall be

the public at large; The name by which the trust shall be known; The name where its principal and/or other offices shall be

situated The property that shall devolve upon the trustee(s) under the

trust for the benefit of the beneficiary/ies; An intention to divest the trust property upon the trustee(s); The objects of the trust; The procedure for appointment, removal or replacement of a

trustee. Their rights, duties and powers etc; The rights and duties of the beneficiary/ies; The mode and method of determination of the trust.

Responsibility of the Trustees

Legal title of the property of a public charitable trust vests with the trustees.

Cannot use trust property or their position for their own interest or private advantage

Trustees may not delegate authority with respect to duties requiring the exercise of discretion.

Public charitable trusts are highly regulated.

In many states, purchases or sales of property by a trust must be approved in

advance by the Charity Commissioner

SOCIETY

Defined as a company or an association of persons united together by mutual consent to deliberate, determine and act jointly for same common purpose.

Minimum seven persons, eligible to enter into a contract, can form society.

SOCIETY

When an NGO is constituted as a society, it is required to be registered under the Societies Registration Act, 1860.

Societies are usually managed by a governing council or managing committee, whereas trusts are governed by their trustees.

Individuals or institutions or both may be members of a society.

Unlike trusts, societies may be dissolved.

Dissolution must be approved by at least three-fifths of the society's members.

Section 20 :Societies Registration Act, 1860

Types of societies that may be registered under the Act include, but are not limited to, the following:

- Charitable societies - Societies established for the promotion

of science, literature, or the fine arts, - For education; and - Public art museums and galleries, and

certain other types of museums.

Procedures of Formation:

Memorandum of Association, and Rules and Regulations

SECTION 25 COMPANIES

The Indian Companies Act, 1956 , which principally governs for-profit entities, permits certain companies to obtain not-for-profit status as "section 25 companies."

For the purposes of promoting commerce, art, science, religion, charity or any other useful object

With intention to apply its profits or other income for promoting its objects.

A section 25 company must apply its profits, if any, or other income to the promotion of its objects,

and may not pay a dividend to its members.

At least three individuals are required to form a section 25 company.

A section 25 company may be dissolved.

Procedures of Formation

The application must include copies of the memorandum and articles of association of the proposed company, as well as a number of other documents,

including a statement of assets and a brief description of the work proposed to be done upon registration.

If the registrar is satisfied that all formalities have been complied with, he will issue a CERTIFICATE OF INCORPORATION from which date the company comes into existence.

Upon dissolution the funds and property of the company may not be distributed among the members of the company.

Rather, the remaining funds and property must be given or transferred to some other section 25 company, preferably one having similar objects as the dissolved entity.

TAX EXEMPTION FOR NOTIFIED CHARITABLE SOCIETIES

The Income Tax Act, 1961U/s 10 (23C) (iv) and (v) following conditions are met:

The organization must be organized for religious or charitable purposes;

The organization must spend 85% of its income in any financial year (April 1st to March31st)

No part of the income or property of the organization may be used or applied directly or indirectly for the benefit of the founder, trustee, relative of the founder or trustee or a person who has contributed in excess of Rs. 50,000 to the organization in a financial year;

The organization must timely file its annual income return

The income must be applied or accumulated in India.

However, trust income may be applied outside India to promote international causes in which India has an interest, without being subject to income tax.

TAX DEDUCTION FOR DONORS

Sec.80G,Income tax Act-types of deductions

Donors are entitled to 100%deduction for donations to some of the Government funds

FOREIGN CONTRIBUTIONS

Foreign Contribution Regulation Act 1976

NGO’s wishing to accept foreign contributions should

Register with Central Government Agree to accept contributions through

designated banks. Must report to Central Govt within 30

days of receipt of foreign funds

REPORT

Source Manner in which it is received Purpose for which it was intended Manner in which it is used Foreign contributions include Currency,

security &articles except personal gifts under Rs1000.

CUSTOMS DUTY

NPO’s involved in relief works, distribution of relief supplies to the needy are 100% exempted from customs duty on the import of food,medicine,clothing and blanket.

Exemption for scientific/technical equipment and components intended for Research Institutes.

TRUST SOCIETY SECTION-25 COMPANY

Legislation Relevant State Trust Act or Bombay Public Trusts Act, 1950

Societies Registration Act, 1860

Indian Companies Act, 1956

Jurisdiction Deputy Registrar/Charity commissioner

Registrar of societies

Registrar of companies

Registration As trust As SocietyIn Maharashtra, both as a society and as a trust

As a company u/s 25 of the Indian Companies Act.

Registration Document

Trust deed Memorandum of association and rules and regulations

Memorandum and articles of association. and regulations

Stamp Duty Trust deed to be executed on non-judicial stamp paper, vary from state to state

No stamp paper required

No stamp paper required.

TRUST SOCIETY SECTION-25 COMPANY

Members Required

Minimum – two trustees. No upper limit.

Minimum – seven managing committee members. No upper limit.

Minimum three trustees. No upper limit.

Board of Management

Trustees / Board of Trustees

Governing body or council/managing or executive committee

Board of directors/ Managing committee

Mode of Succession on Board of Management

Appointment or Election

Appointment or Election by members of the general body

Election by members of the general body

TRUST SOCIETY Sec.25 COMPANY

Objects Charitable, socially beneficial

Charitable,Literary, Scientific

No profit activities

Alteration of Objects

Bound by covenants of Trust deed.Normally only settlor can modify

Simple procedure

Complex legal procedure

Formation Simple& easy Simple& easy Complex procedures:3-6 Months required

Name Comparatively simple

Comparatively simple

Prior approval required

Management

Very Few restrictions imposed by Act

Few restrictions imposed by Act

Formalities of Company Law to be observed

TRUST SOCIETY Sec 25 COMPANY

Meetings No provision laid down

According to law

To be held as per the provisions in law

Penalties Very negligible Few penalties Severe penalties

Legal Status Legal status with certain limitations

Legal status with certain limitations

Full legal status

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