Different Forms of Non-Government Organization in India

Non-government organizations in India can be structured and incorporated as one of the following three forms:

  1. Trust
  2. Society
  3. Non-Profit Company under Section 8 of The Indian Companies Act, 2013

Comparison between a trust, a society and a non-profit company

TrustSocietySection 8 Company
StatuteIndian Trust Act, 1882Societies Registration Act, 1860The Companies Act, 2013
Jurisdiction Concerned state where registeredConcerned state where registeredConcerned state where registered
AuthorityCharity Commissioner / Deputy RegistrarRegistrar of SocietiesRegistrar of Companies
RegistrationAs TrustAs SocietyAs Section 8 Company
Main DocumentTrust DeedMemorandum of Association and Rules & RegulationsMemorandum and Articles of Association
Stamp DutyTrust deed to be executed on a non-judicial stamp paper of prescribed valueNo stamp paper required for Memorandum of Association and Rules & RegulationsNo stamp paper required for Memorandum and Articles of Association
Number of persons needed to registerMinimum two trustees; no upper limitMinimum seven; no upper limitMinimum three; no upper limit
Board of ManagementTrusteesGoverning body or council/managing or executive committeeBoard of directors/Managing Committee
Mode of succession on board of managementUsually by appointmentUsually election by members of the general bodyUsually election by members of the general body

Registration of a Trust

A Trust is formed when an owner of a property (trustor) transfers it to a person who is known as trustee, for the benefit of third party who is known as beneficiary. There are two types of Trusts- Public Trust and Private Trust. It is governed by Indian Trust Act, 1882 across India.

Eligibility/Requirements of Trust Incorporation:-

  • Minimum of two trustees. 
  • Forming Trust Deed.

Documents required for Trust Incorporation:-

  1. Proof of identity of the shareholder. Such documents include Aadhaar, PAN, Passport, Driving license or any other Government-issued identity document would be required.
  2. Proof of address of the shareholder. Such documents include bank statements, electricity bill, water bill, gas bill and telephone bill.
  3. NOC (Non Objectionable Certificate) from the landlord if the registered office is a leased property.
  4. Proposed registered office’s utility bill which includes EB bill, property tax receipt, water bill copy.
  5. Trust deed on stamp paper.
  6. Scanned copy of Sale deed if the registered office is owned property. 

Process of incorporation of Trust:-

  1. Selection of Name and getting it approved
  2. Forming a Trust deed
  3. Getting the trust registered by submitting documents required to the registrar
  4. Getting PAN number, TAN number and opening bank account of the Trust 

Advantages of Trust:-

  1. Management continues even after the disability of the member. 
  2. Better control over assets.
  3. Investment management remains uninterrupted. 
  4. Flexibility of using funds. 

Disadvantages of Trust:-

  • High incorporation cost. 
  • Cash can be accessed by creditors. 
  • Not so responsive to changes. 
  • Property has to be reregistered in the name of trust which involves cost. 

Registration of a Society

A society is a business done to serve society by group of members and not to earn profits. It is registered as a legal entity under The Societies Registration Act, 1860. It is generally formed for charitable activities. 

Eligibility/Registration for registration:-

  • The objective shall be legal and for charitable, scientific and literary purpose. 
  • Minimum of 7 members. 

Documents required for registration of Society:-

  1. NOC from the landlord if the registered office is a leased property.
  2. In case of own property, copy of sale deed along with the EB bill/property tax receipt/water bill copy of the registered office property.
  3. Proposed registered office’s utility bill which includes EB bill, property tax receipt, water bill copy. (Address proof)
  4. Proof of address of all the directors and the shareholders. Such documents include bank statements, electricity bill, water bill, gas bill and telephone bill.
  5. Proof of identity of all the partners. Such documents include Aadhaar, PAN, Passport, Driving license or any other Government-issued identity document would be required.
  6. Affidavit no. 1 for NOC of registered office and its ownership. 
  7. Affidavit no. 2 for name of the society and members not being related to each other.

Process of registration:-

It includes-

  1.  Selection of name. 
  2. Creation of MoA and signing MoA by all members after required document submission. 

Advantages of Society:-

  1. Having contractual rights being a separate legal entity. 
  2. Exempted from income tax.
  3. Limited liability of members. 
  4. Having secured assets. 

Disadvantages of Society:-

  1. Transparency leads to lack of secrecy. 
  2. Undue government interventions.

Registration of Section 8 company

These are limited companies, which are registered under the Companies Act, and will be treated as limited companies without the phrase “limited” being added to their name. They may have been registered either as “private limited or public limited companies”.

Features/Eligibility of a Section 8 Company:-

  1. Is incorporated for the promotion of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of environment or any such other object.
  2. It intends to apply all it’s profits, income, or other earnings, in promoting these objects.
  3. Pays no dividend or income to its members.

Requirements of a Section 8 Company:-

  1. Registration under The Companies Act, 2013 and get licensed.
  2. Minimum 2 directors for Private Limited Company and 3 directors for Public Limited Company must be there.
  3. At least 1 director must resident in India, means a person who has stayed in India for a period of not less than 182 days during the immediately preceding 1 financial year.
  4. MOA and AOA.
  5. All directors must have their valid DIN and DSC.
  6. Annual returns, filings and other compliances should be done.

Advantages of Section 8 company:-

  1. Distinct Legal Identity
  2. Zero Stamp Duty
  3. No Minimum Capital Requirement
  4. CARO requirements don’t apply here
  5. Many tax benefits
  6. More credibility
  7. Exemption to the donors

Documents required:-

  1. Copy of PAN Card
  2. Aadhaar Card
  3. Address Proof (Bank Statement, Electricity Bill, Telephone Bill)
  4. 2 Passport Sized Photographs
  5. Ownership Proof of  registered office(House Tax etc.)
  6. Utility Bill (Electricity Bill, Gas Bill)
  7. NOC(from the owners – if the premises is rented)

Process of registration:-

  1. Apply for name approval
  2. Get DIN & DSC
  3. Name Approval
  4. Apply for License & Certificate of Incorporation
  5. Some other forms on ROC
PARTICULARS FORM OF BUSINESS 
SOLE PROPRIETORSHIPPARTNERSHIP LIMITED LIABILITY PARTNERSHIP ONE PERSON COMPANY PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY 
Minimum Person Required 122227
Approximate Minimum Cost of Registration (in Rs.)                        1,000                           2,500                           5,000                         5,000                         5,000                           9,500 
Approximate Minimum Cost of Annual Compliance (with GST Returns)                        6,000                           7,500                           8,500                       10,000                       12,500                         15,000 
Nature of Liability Unlimited Unlimited Limited Limited Limited Limited 
Eligibility for DPIIT (Start-Up India Recognistion)NONOYES NOYES YES 
Annual Statutory Compliances MinimalMinimalSlightly High Slightly High Slightly High High
Advantages in term of GST Same in All Forms Same in All Forms Same in All Forms Same in All Forms Same in All Forms Same in All Forms 
Advantages in term of Income Tax Less Advantage Very Less Advantage Very Less Advantage Some Advantage More Advantages More Advantages 
Beneficial For Single Owner Short Term Ventures Professional Firms Sole Promoter with Corporate Form New Start-ups & growing businessesHigh Investment Business 
Perpetual Existence (Unlimited Term of Existence)NONOYES YES YES YES 
Minimum Person Required as DirectorN.A.N.A.2123
Can Shareholder & Director be same?N.A.N.A.YES YES YES YES 
Possibility of Change of Management NOYESYES YES YES (Easiest)YES 
Possibility of Transfer of Shares (Ownership)NOYESYES YES YES (Easiest)YES 
Number of Nominee Required N.A.N.A.N.A.1N.A.N.A.