NGOs, or philanthropic organisations, in India are governed mainly by three bodies-
Trust Registration, is done in India by the Trust Act 1882. A Trust is created for the beneficial interest of the Beneficiary. We can broadly classify trusts into two categories:
Private Trusts help a specific person or group. Public Trusts, on the other hand, benefit the public or a changing class of people. Private Trusts are not philanthropic or religious like Public Trusts.
Requirements for the creation of a Trust
A property owner who wishes to create a Trust for another person or organisation.
A person to whom the Settlor/Author bequeaths Trust Property in a bequest or declaration inter vivos.
Whom the Trust benefits.
Trusts have a purpose. A Trust Deed or verbal agreement should indicate this purpose.
The Settlor must provide the Trustee movable/immovable property to create a Trust.
The Settlor/Author and Trustee sign a document stating the Trust’s Objective and Beneficiary.
If the Trust Property is movable and the Trust is constituted by will, no Trust Deed is needed.
The Trustee needs a Permanent Account Number to pay taxes for the Beneficiary(ies) (PAN). Form 49A should be submitted to the Assessing Officer in duplicate.
If the Trust needs to deduct tax at source for its workers or other staff managing or administering Trust Property, it must apply for a Tax deduction Account Number (TAN) in duplicate to the Assessing Officer in Form No. 49B.
If it wants foreign donations, a trust must register under Section 6(1), Foreign Contribution (Regulation) Act, 2010 (“FCRA”).
Separate account for Foreign Contributions (FC A/c)
The FCRA-registered Trust must open a separate account to collect overseas donations.
Separate set of records for foreign contributions
Every organization/individual must keep separate records for overseas donations and contributions.
Approval from RBI
In case where the beneficiary is a non resident, prior approval from RBI is required to that effect.
Even if a Private Trust trades and manufactures goods and services without profit, it must register for a Taxpayer Identification Number (TIN) with its state’s Excise and Taxation Department. VAT and Service Tax Returns use this TIN.
Documents/Details Required for Trust Registration
Following self-attested documents of the members are required:
Trust Deed Registration
The settlor and two witnesses must sign the Trust Deed on appropriate Stamp Paper. The Local Registrar can register the Trust Deed after execution. The Registrar registers the Trust, keeps a copy, and returns the original to the settlor.
● Take all required paperwork and Trust Deed draught to the city Registrar’s office.
● Pay your costs.
● If satisfied, the registrar will complete the paperwork and schedule physical verification.
● Next, prepare the deed on stamp paper, self-attested KYC copy, original KYC, and Settlors, and register the Trust.
Form 10A is necessary for trust registration. Application Form No. 10A requires these documents:
● where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument; 2. where the trust or institution is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment;
● self-certified copy of Registrar of Companies, Firms and Societies, or Public Trusts registration;
● self-certified copy of any documentation proving adoption or modification of the objects;
● self-certified copies of the trust or institution’s annual accounts for the prior year or years (not more than three years immediately preceding the year in which the application for registration is made) for which such accounts have been made up; note on the trust or institution’s activities;
● self-certified copy of existing order granting registration under section 12A or Section 12AA, as applicable; and
● self-certified copy of order of denial of application for grant of registration, if any.
Advantages of a Trust
Disadvantages of a Trust
According to section 20 of the Society Act 1860, a society registration can be done for the following purposes:
Promotion of fine arts.
Diffusion of political education.
Grant of charitable assistance.
Promotion of science and literature.
Creation of military orphan funds.
Maintenance or foundation of galleries or public museums.
Maintenance or foundation of reading rooms or libraries.
Promotion or diffusion or instruction of helpful knowledge.
Collections of natural history.
Collections of mechanical and philosophical inventions, designs, or instruments.
Documents/Details Required for Society Registration
of all the members of the proposed society has to be submitted along with the application
of all the members of the society also has to be submitted. The following can be used as valid residence proof: Bank Statement/ Aadhaar Card/ Utility Bill/ Driving License/ Passport
Memorandum of Association
The memorandum of association has to be prepared, which will contain the following clauses and information:
● The work and the objectives of the society for which it is being established.
● The details of the members forming the society.
● It will contain the address of the registered office of the society.
Rules & Regulations of the Society
The rules and regulations of the society also have to be prepared, which will contain the following information:
● Rules and regulations by which the working of the society will be governed and the maintenance of day-to-day activities.
● It will contain the rules for taking membership in society.
● The details about the meetings of the society and the frequency with which they will be held are to be mentioned.
● Information about the Auditors.
● Forms of Arbitration in case of any dispute between the members of the society.
● Ways for the dissolution of the society will also be mentioned
A covering letter mentioning the objective or the purpose for which the society is being formed will be annexed to the beginning of the application. It will be signed by all the founding members of the society.
Proof of Address
A copy of the proof of address where the registered office of the society will be located, along with a NOC from the landlord, if any, has to be attached.
List of all the members
A list of all the governing body members has to be given along with their signatures
The president of the proposed society has to give a declaration that he is willing and competent to hold the said post
The Registrar of Societies requires two copies of the above documents and fees. The registrar will sign and return the first copy after receiving the application and keep the second copy for approval. The registrar issues an Incorporation Certificate with a registration number after evaluating the documents.The signed Rules & Regulations and Memorandum must be filed with the society or state registrar for a fee. The registrar will register the society if the application is satisfactory.
Steps for Registration
Like partnerships, societies can be registered or unregistered. Only registered societies can endure assigned properties and have an ensemble filed against or by them. States register societies. Thus, society registration applications must be submitted to the state authorities where the society’s registered office is located. For society registration, founding members must agree on the name, then create the Memorandum and Rules & Regulations.
Selection of a Name The Society Act, 1860 prohibits the registration of societies with the same or similar names. The proposed name shall not reflect state or Indian government patronage or violate the Emblem & Names Act, 1950.
2. Memorandum of Association Every founding member must sign the society’s Memorandum of Association and Rules & Regulations, witnessed by a Gazetted Officer, Notary Public, Chartered Accountant, Oath Commissioner, Advocate, Magistrate first-class, or Chartered Accountant with their official stamp and address. Society name and purpose must be in the memorandum. It also lists society members’ names, residences, titles, and vocations. For registration, prepare, submit, and sign the following:
Registered under The Companies Act, 2013, where it is proved to the satisfaction of the Central Government (Power delegated to ROC) that a person or an association of persons proposed to be registered under this Act as a limited company—
The Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited” or “Private Limited,” and the Registrar shall, on application, in the prescribed form, register such person or association as a company unde “Limited” or “Private Limited.”
Documents/Details Required for Incorporation of a Section 8 Company
Following self-attested documents of the Proposed Director and members is required:
Steps for incorporation
Memorandum of Association
Articles of Association (No specified format)
Declaration in by CS/CA/CWA in practice, that the draft MOA & AOA have been drawn up in conformity with the provisions of Section 8 and rules made thereunder relating to registration of the company under Section 8 and matters incidental or supplemental thereto have been complied with
Declaration by each of the persons making the application
Declaration shall be submitted by each of the subscribers to the memorandum and each of the first directors named in the articles
DIR-12 and DIR-2
Particulars of first director of the company and his interest in other firms or body corporate along with his consent to act as a director
An estimate of the future annual income and expenditure of the company for next three years
Name Approval Letter received from CRC
Note: Section 8 Company cannot employ SPICe 33 and 34 (e-MOA and e-AOA). Section 8 enterprises must submit MOA and AOA pdfs to SPICe-32. ROC will issue the company’s Certificate of Incorporation after approval. The company must apply for business permission within 180 days of formation.
Advantages of a Section 8 Company
Disadvantages of a Section 8 Company
● Section 8 Company is a separate legal body and is different from its members. The Company has continuous existence. Along with having planned operations and better flexibility.
● A Section 8 Company is excluded from the obligation of paying stamp duty on the MOA and AOA of the private or public limited business, which is applicable for registration of other forms of company structures.
● Indian Section 8 Companies have no minimum capital requirement. The capital structure might change as the company grows. It can be founded without share capital. The finances necessary for carrying the business operations can be brought, later, in the form of gifts and/or subscriptions from members and the general public.
● Requirements of Companies Auditor’s Report Order or CARO do not apply to this sort of corporation.
● Indian Section 8 Companies receive several tax benefits.
● Companies are more trustworthy than other charities. The Companies Act carefully regulates them. The “MOA and AOA” cannot be changed, and an annual audit is required. These companies are trustworthy due to their profit-loss rules.
● Sections 12A and 80G of the Income Tax Act exempt donors to Section 8 Companies.
● A registered partnership firm can join individually and become a director.
● Profit or Any other Income of the Company is applied for the promotion of the main object only.
● Declaration of dividend or distribution of profit to the members is not allowed.
● No member can be appointed as a remunerated officer of the Company.
● No remuneration / benefit shall be paid to a member being a servant / officer of the Company (except reimbursement of out of pocket expenses, reasonable interest on money lent or reasonable rent on the premises)